Thailand is one of the centermost economic hubs in Southeast Asia, thanks to its robust economy, vibrant culture, and strategic proximity to other ASEAN member countries. As such, it is widely considered one of the ideal locations to establish trade and manufacturing operations.
This article will dive deeper into starting a business in Thailand’s Free Trade Zones (FTZ) and what benefits you can take advantage of by registering your foreign company operations in one of these districts.
What is the Thai Free Trade Zone (FTZ)?
Thailand’s free trade zone (FTZ) was established to encourage manufacturing and trade activities within its market by offering several benefits to relevant companies. The FTZ is a significant reason why Thailand is an optimal location for starting a trading company.
It is an area in which goods and commodities can be imported, processed, manufactured, and exported more easily through exemptions or reductions in terms of customs duties and taxes. Thailand’s FTZs are distinguished between two types of activities: Industrial and trade operations.
Any company that seeks to apply to operate within a free zone must therefore be prepared to establish its activities within the specific territories that are reserved for these purposes. These are divided between General Industrial Zones and Special Economic Zones (SEZ).
Which industries can operate in Thai Free Trade Zones?
General Industrial Zones
General Industrial Zones (also known as industrial estates) are free trade zones established to group different companies operating factories with industrial activities, such as manufacturing and processing. These zones allow for Thai authorities to manage environmental impact, as well as ensure that activities can be carried out without impeding on urban areas.
Currently, there are 62 industrial zones in Thailand. Companies that register and set up their manufacturing operations in these areas can benefit from certain advantages in terms of obtaining resources and Thai labor. Generally, these companies are exempt from import duties and VAT on commodities and equipment.
These types of free trade zones are mainly governed by the Industrial Estate Authority of Thailand (I-EA-T). They will normally set up and provide companies that apply to settle in these areas with the necessary infrastructure, land permits, and transportation for carrying out their operations.
Special Economic Zones
Special Economic Zones in Thailand are focused mainly on trade activities, such as exporting. For this reason, they are located nearer to Thai borders to facilitate access to natural resources and goods. Companies that set up their operations in an SEZ are generally entitled to exemptions on import duties and corporate income tax reductions.
It is important to note that Thai SEZs specifically target some industries as they are considered beneficial to strengthening the Thai economy. If you set up a company that matches one of these, you may be entitled to additional benefits and incentives. Although many industries can be considered as targeted, the most common are:
- Agriculture and fishing
- Automotive and machinery
- Electronics and appliances
- Medical equipment
- Pharmaceutical
- Plastics
- Tourism
Setting up a company in Thailand’s Free Trade Zone
Benefits of starting a business in Thailand’s FTZ
If you are considering registering your company in Thailand, then it would be in your best interest to consider whether you could establish your operations in a Thai Free trade zone. Companies that operate in the FTZs generally receive several benefits and incentives to streamline their activities:
- Trade benefits:
- Exemption on import duties and VAT for goods being imported into FTZ
- Exemption on export duties for goods manufactured or produced in FTZ
- Streamlined customs procedures to expedite the movement of goods
- Tax benefits:
- Potential reductions and exemptions on corporate income taxes
- Potential reductions and exemptions of taxes on dividends or other financial gains
- Company registration:
- Added flexibility in terms of foreign ownership regulations (depending on managing authority) allowing up to 100% foreign ownership
- Potential for provided infrastructure and supply chain facilitation
Registration process
If you plan to register your company in Thailand in a free trade zone, the first step will be to identify which FTZ matches your business requirements. As each FTZ has a specific managing authority, Emerhub can help you apply to the authority that corresponds to your targeted zone.
Our experts will also weigh which legal entity you wish to register as and if the FTZ is the best option for your business. For example, in some cases, it may be more advantageous to register as a BOI-promoted company in Thailand than to operate in an FTZ. Check out our article on everything you need to know about a BOI company in Thailand to learn more.
Emerhubs team of experts can assist you with all your inquiries regarding company registration in Thailand. Contact us via the form below to set up a consultation with one of our advisors to go over your specific business needs!
