Looking to expand your business into one of Thailand’s free zones? With generous government incentives like tax deductions, streamlined processes, and VAT exemptions, obtaining a free zone license can be a beneficial step for your business operations.
In this guide, we’ll provide an in-depth look at the types of free zones, the key requirements to set up your company within them, and the application steps to acquire a free zone license in Thailand.
Overview of Free Zones in Thailand
Types of Free Zones and Their Benefits
There are two types of free zones in Thailand, each focusing on different industries with varying incentives and features. Depending on your planned business activities and interests, you can set up your company in one of these two zones:
| Features | Special Economic Zones (SEZs) | General Industrial Zones (GIZs) |
| Purpose | To attract foreign investment and enhance trade, focusing on export-oriented activities. | Aimed at supporting local manufacturing and processing industries. |
| Location | Located in strategic areas, usually near borders or major transportation hubs. Ex: Songkhla, Chiang Rai and Nakhon Phanom. | Found throughout Thailand in suburban or urban areas. Ex: Amata City Industrial Estate in Chonburi and Bangpoo Industrial Estate in Samut Prakan. |
| Ownership | Foreign investors can fully own businesses without a foreign business license. | Allows for foreign ownership but may have different regulations depending on the zones. |
| Tax Incentives | Significant tax incentives like exemptions from corporate income tax and personal income tax, double deductions, import duty exemptions for raw materials, etc. | Has import duty exemptions and VAT exemptions on machines and raw materials, refund of duties for local goods imported into the zone for production. |
| Operational Focus | Encourages a wide range of industries, particularly ones focused on export and technology transfer. | Primarily focused on the manufacturing industry and service-related businesses. |
| Regulatory Framework | Governed by the Board of Investment (BOI) and Thailand’s Customs Department with the Customs Act and Investment Promotion Act. | Governed by the Industrial Estate Authority of Thailand (IEAT) with the Industrial Estate Authority Act and Land Use Regulations. |
Why Do You Need A Free Zone License?
To operate your business within Thailand’s free zone, obtaining a Free Zone License from the Director-General of Customs is necessary. This license offers benefits to encourage investments in Thailand’s manufacturing industry and export-oriented activities. These benefits include:
- Allowing manufacturers to import raw materials and components without incurring import duties
- Tax incentives like income tax exemptions or tax reductions based on business type and location.
Most manufacturers rely on imports as part of their daily operations and business activities, meaning they need to attain the necessary licensing beforehand to remain compliant with local laws. This includes obtaining an import license, license per invoice, and special permits for controlled goods among others.
The process of obtaining these licenses can be complex and challenging as you will have to go through different governing bodies and have a thorough understanding of local laws and customs operations. Alternatively, Emerhub’s Importer of Record service allows you to bypass the need for your own import license by using our pre-established logistics network for importing your products.
Key Requirements for Setting Up A Legal Entity Within A Free Zone
Establishing a legal entity within a free zone in Thailand can be beneficial for your business and meeting these outlined requirements is crucial for a successful application. The most common business structure for foreign investors in Thailand is a private limited company as it typically allows for full foreign ownership under certain conditions.
To set up a private limited company in a free zone, you will need to:
- Register your business name at the Department of Business Development (DBD)
- Prepare a Memorandum of Association (MOA)
- Register your company at the DBD
- Minimum paid-up registered capital of 20 million baht for Bangkok and its surrounding areas. Other regions may require a different amount as dictated by the Director-General of Customs
- Demonstrate financial stability through certified financial statements of the past 3 years
- Must own the land or have land rights to manage the proposed Free Zone area, evidenced by title deeds or lease agreements
- Must not have any offenses against customs laws or other relevant regulations within the past 3 years
How to Apply For A Free Zone License in Thailand
To obtain approval for a free zone license, you will need to prepare a project plan outlining your intended business operations, financial projections, management structure, and business purpose in detail. Additionally, other mandatory documents for a free zone license application include shareholder information, site blueprint, and VAT registration.
The site blueprint is an important part of the application submission and must be certified by a licensed architect or engineer beforehand. The size requirement is no less than 40 cm x 60 cm, and 3 copies are required. The content of the blueprint should include:
- Location of Activities: Indicate where activities will take place in the free zone like warehousing, manufacturing, etc.
- Layout of Facilities: Detailed layouts of the buildings, machinery placement, and relevant infrastructure.
- Utilities: Indicate utilities placement like water, electricity, waste management systems, etc.
- Access Points: Show access points for transportation and logistics, roads, and loading areas.
Business-Specific Licenses
Based on your business activities, there are certain business-specific certifications and licenses you will need to apply for such as:
- Thai Industrial Standards Institute (TISI) Certification: For operations involving electrical and electronic products. This certification ensures that you comply with safety standards for sale and consumer use.
- ISO Certifications: Depending on your industry, you may require different ISO Certifications. ISO Certifications enhance company credibility and ensure compliance with international standards. (Ex: ISO 9001 on Quality Management, ISO 14001 on Environmental Management, and ISO 45001 on Occupational Health and Safety).
- Factory License: Facilities exceeding 50 workers or machinery above 50 horsepower need to obtain this license from the Department of Industrial Works. It ensures adherence to safety and environmental regulations.
Emerhub offers a comprehensive licensing service to help you secure your free zone license. Our expert consultants will liaise with the local governing authorities on your behalf and advise you on Thai compliance regulations.
We’ve got a related article on starting a business in Thailand’s Free Zones for a more in-depth look at the process. Alternatively, you can reach out to our local experts by filling out the form below and we’ll be in touch.
