Can Thailand BOI incentives be revoked and clawed back?

01What promoted status actually is: conditional, not unconditional

This is the page we think every owner who has just received a certificate should read once. The other pages cover how each obligation is met. This one covers what happens when they are not — and why that is more serious than most people assume.

Holding the certificate means a set of mutual obligations now exists between you and the authorities: you undertake to build the project at the scale, with the process and on the timetable you filed, and to keep operating it; in return you get a package of tax and non-tax benefits. If the undertaking is not met, the benefits can be taken back.

Under the relevant provisions of the Investment Promotion Act, failure to meet promotion conditions or reporting obligations can trigger suspension or revocation of promoted status, and clawback of tax incentives already taken (source 1). The exposure, in other words, is not "no more exemption from here on". It is "the tax you did not pay over the past few years goes back".

That is what makes it impossible to run BOI compliance on a deal-with-it-when-it-happens basis. A clawback looks backwards: the longer a problem runs and the more tax has been exempted, the larger the exposure. Find it in year three and it is three years of tax you are making good.

02What commonly triggers suspension or revocation

The situations we see fall into five groups.

• Reporting obligations left undone for a long stretch. Missed or late quarterly progress reports and annual operating reports are the most common trigger, and the easiest to avoid. See what has to be reported each year once you hold a BOI certificate.
• The project as it operates does not match the certificate. The products actually made, the process or the capacity depart materially from what was filed, or the project was never really built as promised.
• Deadlines passed with operations not started or the investment not completed. The period ran out and no extension was obtained.
• Misuse of the exemptions. Machinery or raw materials imported duty-free are put to non-promoted use or disposed of without approval, or income from non-promoted business is dropped into the exempt basket.
• Project-specific conditions on the certificate are not met. Every certificate carries general conditions plus a number of project-specific ones — commonly that a particular process step be performed in the country, that a certification be obtained, or that an investment amount or a headcount be reached. These sit in the annex pages, and they are the part most easily filed away and forgotten. See which clauses on the certificate are the dangerous ones.

03The failures come from nobody being accountable, not from deliberate breach

What we observe is that almost nobody sets out to breach their certificate conditions. The usual path runs like this: the team that obtained the certificate breaks up, the certificate goes into a filing cabinet, and the conditions are never turned into anyone's day job. Two years on the business shifts, product lines change, people move, and nobody goes back to check against the certificate. By the time the annual report raises a question, three or four non-conformities have piled up.

04Three moves that make the conditions manageable

The work here is not complicated. It is a matter of taking the certificate out of the cabinet and turning it into something the company actually runs on.

• Turn the certificate into a list of obligations. Break out the general conditions and the project-specific ones one by one, and against each note when it has to be done, what evidence it needs, and who owns it. That list belongs where management can see it, not in a drawer in the finance office.
• Turn the deadlines into a calendar. Put every report, deadline and renewal into the company's annual compliance calendar and run it alongside the tax filing calendar.
• Go back to the certificate before the business changes. Changing a product, changing a process, expanding capacity, disposing of equipment, changing the shareholding — check each of these against the certificate conditions first, and decide whether a change has to be applied for in advance. Applying in advance is a routine procedure. Being found out afterwards is a different matter.

05If you have never gone through the conditions, a stocktake now pays

If you have held the certificate for a while and have never worked through the conditions systematically, a stocktake now is worth doing: break the certificate down clause by clause, check it against what has actually happened over the past few years, and fix first whatever can still be fixed.

A review like this is usually done by our advisers as one complete pass, producing a list of findings and remediation suggestions; the company then decides the order in which to deal with them. What to do about a finding varies a great deal from case to case — it has to be judged against your own certificate conditions, how far the actual position has drifted, and the value of the benefits already taken. There is no generic approach. What the BOI engagement covers.