On 26 December 2018, Thailand published in the Official Gazette the Royal Decree for the implementation of the International Business Center (IBC) regime, which replaces the International Headquarters regime, the Regional Headquarters regime, the Treasury Center regime, and the International Trading Center regime, all of which were found harmful as part of the OECD review in relation to BEPS Action 5.
Qualifying companies under the new IBC regime are eligible for a number of benefits/incentives for a standard period of 15 years, including:
With respect to royalty income, the regime applies for royalty income from associated enterprises, but only in respect of royalties arising from R&D performed in Thailand. With respect to associated enterprises, an enterprise is considered associated for the purpose of the regime where there is at least a 25% direct or indirect holding in the IBC or the IBC holds at least 25% in the enterprise, or a third party has at least a 25% direct or indirect holding in both.
The conditions to qualify for the IBC regime include:
Where the conditions are not met for one year, including minimum local expenditure and providing the qualifying services, the incentives do not apply for that year. If the conditions are not met in consecutive years, the IBC status may be revoked, and incentives provided in past years recaptured.
For companies that were previously approved for incentives under the prior regimes, those incentives will generally continue to apply until the approval expires, although those with Regional Headquarter status may only apply incentives until 2020. Companies under the prior regimes may also apply to convert to the IBC regime, subject to meeting the conditions. However, for regional and international headquarters, a lower expenditure threshold of THD 15 million is provided for the application of the 8% rate instead of THD 60 million.