Thailand Free Trade Zones

Thailand Free Trade Zones: Introduction

Thailand Free Trade Zones have 2 main types: General Industrial Zone and Special Economic Zones (SEZs). The Thailand General Industrial Zone is more commonly known as an industrial estate in Thailand. Currently, there are 62 industrial estates and 10 SEZs in Thailand.

Generally, industrial activities are conducted within an industrial estate while a SEZ specialises in both manufacturing and exporting activities. A Thai Free Trade Zone encourages business operations beneficial to the country by removing manufacturing barriers in Thailand.

Businesses that set up within the Thailand Free Trade Zones are able to enjoy multiple free trade zone benefits and tax advantages such as exemption from customs duties and excise duties, as well as less stringent quality control standards. Simultaneously, businesses are encouraged to utilise Thailand services and raw materials and employ local workers for their operation.

Types of Thailand Free Trade Zones

Thailand Industrial Estates

• There are 62 industrial estates in the country. The Industrial Estate Authority of Thailand (IEAT) directly administers 12 of them; the rest are jointly operated with private developers.
• Typically, business owners will choose to set up their company in an industrial estate for industrial or commercial activities, or to provide services to companies within the estate.
• Investors in the estate are able to own land for carrying out industrial activities. Foreign employees in the area can also apply for a dependant visa for their family members and remit currency abroad.
• Businesses that set up in an IEAT-operated area will enjoy exemption or refund of customs import duty, value-added tax (VAT) and excise tax on imported equipment and raw materials.
• The tax benefits in other regions will depend on the authority managing it.

Thailand Special Economic Zones

• There are currently 10 Special Economic Zones (SEZs) in Thailand, spread across the provinces of Chiang Rai, Narathiwat, Tak, Nong Khai, Trat, Kanchanaburi, Mukdahan, Songkhla, Sa Kaeo and Nakhon Phanom.

Tak Province

• The Tak province consists of a special economic development zone with 14 sub-districts.
• With a strategic location on the East-West Economic Corridor (EWEC), the Western region of Tak facilitates the transport of goods and resources from the free trade zone to Yangon, the economic centre of Myanmar.
• The Mae Sot Airport is an international airport located in the Tak Province that is connected to two domestic locations.
• There are plans by the IEAT announced in the news, to construct new industrial estates in Tak province in 2022.

Sa Kaeo Province

• The Sa Kaeo Special Economic Zone is situated in the GMS Southern Economic Corridor, which acts as an important avenue for Thailand to transport products to Phanom Penh and Southern Vietnam.
• The SEZ can benefit from co-production with the Poipet-O’neang Special economic development zone in Cambodia since many Thai businesses have labour-intensive factories in the Cambodia Free Zone.

Trat Province

• Well-known as a tourism destination, the Trat province is an attractive Free Zone for businesses seeking to set up in the tourism and service industries.
• The free trade zone is also linked to the Koh Kong Special economic development zone in Cambodia.
• It has 1 commercial airport and is connected by road to the Laem Chabang sea port and Sihanoukville sea port in Cambodia.

Mukdahan Province

• Situated on the East-West Economic Corridor (EWEC), the SEZ links Thailand to nearby Asian countries such as Japan, South Korea and Taiwan.
• The SEZ is an important avenue for transportation of goods and raw materials to Vietnam and Southern China.

Songkhla Province

• Established in the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), the Songkhla Special Economic Development Zone is situated close to the Penang Sea Port, Klang Sea port of Malaysia and a railway linking Thailand with Malaysia.
• In 2021, industries estates have been successfully built in the free trade areas.
• In addition, the province has a joint Special Economic Development Zone with Sadao and Bukit Kay Hitam in Malaysia, providing a wider range of opportunities for investment in the manufacturing and service sectors and encouraging investments from Malaysia.
• The Zone hosts many production networks that are connected with Malaysia, facilitating the transport of rubber, seafood and electronics between the two counties.

Chiang Rai Province

• The Chiang Rai Special Economic Zone is connected to the Yunnan Province in Southern China by both land and sea, allowing for more efficient trade between the two countries.
• Due to the high quality of its logistic services and its popularity as a tourist destination, the Chiang Rai Province is a popular place for business owners seeking to incorporate in Thailand.

Nong Khai Province

• The province is a channel for cross-border trade between Thailand and Laos. With the completion of the FTZs in Laos, goods can be more easily transported between the FTZs.
• This free trade zone has a well-integrated transport network, include facilities to aid travel by road, rail and air.

Nakhon Phanom Province

• The Free Zone is a commercial route through Vietnam and South China (Guangxi) that facilitates the efficient and effective deliverance of products to faraway eastern countries like Japan, Korea, Hong Kong and Taiwan.
• Nakhon Phanom Province is known for producing good quality agricultural products such as rice, sugar cane and cassava.

Kanchanaburi Province

• The province is connected with the Special Economic Development Zone of Myanmar and the eastern seaboard of Thailand.
• The Free Zone has the potential to facilitate transport between Thailand and Tawai in Myanmar through sea routes.

Narathiwat Province

• The province is connected to Malaysia through the Asian Highway No. 18, which also connects to Singapore.
• Known as a commercial port for transporting fishing products, wood products, consumer goods and other kinds of products, the province largely exports boats and other consumer products.

Advantages of Thailand Free Trade Zones

Tax benefits of Thailand Free Trade Zones

• Companies incorporated in a targeted industry in a Thailand SEZ are exempted from corporate income tax for the first eight years. Thereafter, they will receive additional 50% corporate income tax deduction for 5 years.
• Imported merchandise necessary for operations of companies in a Thailand Free Zone is not subjected to import duties, VAT, excise tax and alcohol tax if applicable. Imported merchandise eligible for exemption includes machinery and equipment, foreign products and goods transferred from other FTZs.
• Domestic goods transferred to a FTZ are exempted from VAT.

Facilitation of export activities

• Imported goods or domestic raw materials transferred to a FTZ for business operations are exempted from standard quality control requirements and any other similar requirements if the final product is re-exported to other countries.
• Typically, there is no import tax or internal taxes and duties on scrap, waste and yield loss from an imported component in a Thailand Free Zone.

Access to skilled labour in Thailand Free Trade Zones

• Since many MNCs are found in the Free Zones in Thailand, there will be a transfer of managerial or technical skills to local Thailand employees when MNCs hire local employees.
• Many MNCs are also willing to invest in job training programmes to upgrade the skills of their local employees.

Provision of support infrastructure in Thailand Free Trade Zones

• Many Free Zones have a well-integrated transport and communication network to support activities within the region.
• They also offer warehousing, distribution and other storage facilities to support export and import activities.

Alternatives to Thailand Free Trade Zones

Board of Investment Promotion

• Companies that conduct specific business activities in the following sectors can apply for a Board of Investment (BOI) Promotion:
  • Agriculture and Agricultural Products
  • Mining, Ceramics and Basic Metals
  • Light Industry
  • Metal Products, Machinery and Transport Equipment
  • Electronic Industry and Electric Appliances
  • Chemicals, Paper and Plastics
  • Services and Public Utilities
  • Technology and Innovation Development
• Generally, only companies with minimum capital investment requirement of at least THB 1 million for a project in a qualifying sector will be considered for the BOI Promotion.
• Companies that qualified for BOI Promotion will be able to enjoy corporate tax exemption for 8 years and 50% tax deduction for 5 years afterwards.
• They will also be exempted from import duty and taxes on raw materials and machinery used in R&D activities.
• Additionally, a BOI certified company can be wholly foreign owned and are able to hire foreign workers without restrictions.

Eastern Special Development Zone (ESDZ)

• Known more commonly as the Eastern Economic Corridor (EEC), the ESDZ was established in 2017 to promote economic interconnectivity and ties, and positioned between the Chonburi Province, Chachoengsao Province and Rayong Province. The government in Bangkok has identified and supported numerous investment projects to develop public utilities, transportation systems, logistics and human resources, as well as improve connectivity and facilitate investment in the region.
• The ESDZ is the biggest project in Thailand and actual investment is expected to reach up to US$10 billion in 2021.
• Although the ESDZ is considered a Free Zone in Thailand, it is guided under a separate legislation: the Eastern Special Development Zone Act. Companies that set up in the ESDZ enjoy different incentives and have access to a more well-developed support infrastructure.
• Investment projects in the ESDZ can enjoy tax holidays, ranging from 5 to 10 years, depending on the industry.
• There are also no import duties on machinery and raw materials used in production and R&D activities within the ESDZ.
• Additional tax deductions may be granted for certain R&D expenses.
• Furthermore, foreigners that set up in the ESDZ are able to apply for a business visa for up to 5 years and do not have to apply for an additional work permit to work in Thailand.
• The ESDZ in Thailand consists of different zones for specific industries. Targeted industries in the ESDZ include Next-Generation Automotive, Intelligent Electronics, Advanced Agriculture and Biotechnology, Food for the Future, High-Value and Medical Tourism, Automation and Robotics, Aviation and Logistics, Medical and Comprehensive Healthcare, Biofuel and Biochemical, Digital, Defence and Education and Human Resource Development.
• The ESDZ also consists of numerous industrial estates to facilitate related activities in the area.

How to proceed with registering a company in Thailand Free Trade Zones?

• Contact us to find out more about how to register a company in Thailand Free Trade Zones, including opening a corporate bank account and more. Our team of experts will revert within the next 24 hours.

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