International Business Center
An International Business Center (IBC) refers to a company that’s incorporated in Thailand and has associated enterprises overseas. The business center provides services to those enterprises.
To qualify for IBC status, the center must provide one or more of the following services:
If you are interested in setting up an International Business Center in Thailand, Plizz can help. This is a complicated process, but our legal team can help you move through the process swiftly.
Benefits of an International Business Center
International Business Centers provide key benefits. First, IBCs can be majority or 100 percent foreign-owned. The IBC can also bring in expatriates to provide services, and Thailand provides visas and work permits for qualified foreign nationals that work at the IBC.
Unlike some other businesses, IBCS have permission to own land. Companies typically have to be at least 51 percent Thai-owned to purchase land, so this is an important benefit.
Also, IBCs allow repatriation of foreign currency and businesses that operate in research and development and training activities to not pay import duties for the machinery they bring into Thailand. This saves these businesses a great deal of money.
IBCs also offer extensive tax benefits that are available for 15 years. First, if you open an IBC, you will enjoy a reduced corporate tax rate. If your IBC has expenses of at least 600 million Baht a year, your tax rate will be reduced by 3 percent. You’ll enjoy a 5 percent reduction to your tax rate if your IBC has annual expenses of at least 300 million Baht. The tax reduction is 8 percent if the IBC has expenses of at least 60 million Baht a year.
IBCs also have a tax exemption of all dividends they pay to shareholders located offshore. Also, the tax exemption extends to interest payments made on loans related to treasury activities. To qualify for the tax exemption, the payments must be made to foreign beneficiaries.
Qualifying treasuring income is also exempt from some business taxes, and eligible expatriate employees benefit from a flat personal income tax rate. Their income is only taxed at 15 percent.
Drawbacks of an International Business Center
While IBCs offer lots of benefits, some drawbacks must be considered, as well. The Plizz legal team can go over these drawbacks in greater detail if you are unsure if an IBC is right for your company.
First, IBCs are somewhat difficult to set up. You must provide the proper supporting paperwork, or your application will be denied. Fortunately, this obstacle is easy to overcome. Plizz can gather the documents for you.
The legal team will even submit them on your behalf. That removes the stress associated with setting up an IBC in Thailand.
The potential revocation of benefits is also a drawback. If the IBC does not meet the tax incentive conditions in a year, it will not receive a tax break for that period. If the IBC does not meet the conditions for two consecutive years, it can lose its IBC status. The incentives it received in previous years can also be withdrawn.
Finally, Thailand has implemented transfer pricing rules for IBCs regarding related party transactions. Companies must use the proper pricing structure. This can be confusing for new IBCs, so it is important to obtain legal advice before doing business in Thailand.
Businesses must meet various requirements to start an International Business Center in Thailand.
First, the IBC must provide treasury or support services to its affiliates located overseas. These services must meet the criteria under Thai law. If the company acts exclusively as a treasury center, it must have a minimum of five qualified employees. Otherwise, it needs a minimum of 10 qualified employees.
There are also financial requirements. The company must invest at least 1 million Baht and have a minimum of 10 million Baht in paid-up registered capital at the end of each accounting period. Finally, the IBC must have at least 60 million Baht in annual operating expenditures in Thailand alone.
Timeline for Setting up an International Business Center
While getting approved for an IBC can be quick, preparing the application is somewhat laborious. That’s why it’s critical to let Plizz help.
If you already operate a regional operating headquarters, an international trading center, an international headquarters, or a treasuring center in Thailand, you can apply to convert it to an IBC. These options are being phased out, so it’s important to apply to convert your business now.
You will fill out an application, and once approved, you will enjoy the benefits afforded to IBCs.
If you do not have one of the above-mentioned businesses, you will need to gather your paperwork and go through the process of applying to start an IBC. The application must include the type of business, business plan, and information related to the affiliates. Also, the application requires information about the expatriates who will request a reduced income tax rate. Once the documents are prepared, you must submit them to the director-general of the Revenue Department and wait for the approval. If your documents are in order, and your application is prepared properly, the approval process won’t take long.
An IBC is an excellent way to expand your business. The tax incentives are attractive to investors, and you can increase your revenue a great deal. However, it is difficult to apply for an IBC. Everything must be in order, or you’ll miss your chance to take advantage of this opportunity.
Let Plizz handle the paperwork for you. Our skilled legal team is experienced in helping foreigners start businesses in Thailand. Whether you need to convert an existing business or want to start an IBC from scratch, we will handle it for you.
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