Thailand

TH-6:Tax incentives

Policy Description

In 2006 the Thai government introduced tax incentives for energy efficiency projects. The tax incentives include: exemption of the import duties for energy efficiency / renewable energy equipment, exemption of corporate income tax for 8 years for energy efficiency equipment and renewable energy manufacturers and ESCO companies, and reduction of the corporate income tax for companies that improve their energy efficiency or develop renewable energy projects.

Description

In 2006 the Thai government introduced tax incentives for energy efficiency projects. The tax incentives include:

  • Exemption of the import duties for energy efficiency / renewable energy equipment
  • Exemption of corporate income tax for 8 years for energy efficiency equipment and renewable energy manufacturers and ESCO companies
  • Reduction of the corporate income tax for companies that improve their energy efficiency or develop renewable energy projects

Tax deductions are made available via three methods [8]:

  • Cost-based (applicable to the first 50 million THB investments): this allows a 25% tax break on the actual investment in energy efficiency projects, by phasing the corporate tax deduction over a period of 5 years.
  • Performance-based (maximum incentive of 2 million THB per facility): 30% of the savings value from energy saving projects becomes a tax deduction through income tax for the project owners.  Pre- and post-audits are required to evaluate the performance
  • BOI (Thailand Board of Investment): The Board of Investment allows investors who invest in energy efficiency and renewable energy business (such as energy efficiency and renewable energy technology and equipment manufacturing business, or ESCO companies) to receive a waiver of income and import tax waiver for a maximum 8 years.

The Department of Alternative Energy Development and Efficiency (DEDE) under the Ministry of Energy monitors the tax incentive.  Tax incentives by the Board of Investment (BOI) for energy efficiency and renewable energy include:

A eight-year corporate income tax holiday with no cap and are exempt from import duties on machinery (specifically for energy service companies)

For 2010-2012 the Board of Investment granted incentives for various sectors including energy conservation and alternative energy. Incentives include:

  • Exemption from corporate income tax for three or eight years, depending on the business activity;
  • Exemption from import duty for machinery; and/or
  • A 50% reduction in corporate income tax for not more than five years after the corporate income tax exemption period expires.

These tax incentives are not available after 2012, although incentives granted for projects approved during 2010-2012 will continue to apply for the remaining term [10].

From 2013 onwards, BOI offers the following tax incentives [11]:

  • Corporate income tax holidays up to 8 years
  • Import duty reductions or exemptions on equipment and raw material
  • Double deduction of public utility costs
  • Deductions for infrastructure construction/installation costs

The Board of Investment has identified “Renewable Energy and Environmental Services” as a target industry in their new investment strategy that is to be effective from 2015. This will include new incentives for this sector [12].

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic, Incentives & Subsidies

Position in the Pyramid

About Us

Participation: Voluntary

Period

Start Date: 2006

Policy Linkages

Supports Energy Conservation Promotion (ENCON) Act Effort Defining
Supports Energy Conservation (ENCON) Program Effort Defining
Supported By Energy Conservation Promotion Fund (ENCON Fund) Supporting Measure
Complements ESCO Fund Supporting Measure
Complements Energy Efficiency Revolving Fund (EERF) Supporting Measure

Agencies Responsible

Ministry of Energy: Department of Alternative Energy Development and Efficiency (DEDE)

Primary Objective: Energy

Objective

­- To induce companies to invest in the purchase of energy-efficient equipment/machinery, and energy efficiency business investment. ­- To encourage new investment in energy conservation and renewable energy businesses through income and import tax exemptions

Target Group

Energy efficiency and renewable energy manufacturers, ESCO companies, and energy efficiency and renewable energy projects.

Driver of energy consumption or emissions affected by policy: Relative efficiency

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

Energy efficiency and renewable energy manufacturers; ESCO companies; and renewable energy producers.

Quantitative Target? yes

Target: - Unknown for the whole program phase; - During the ENCON Program Phase 3, the industry energy saving through tax incentives was estimated to be: 1.6 million toe from 2008-2011 [9]

Progress Monitored? yes

Verification Required? yes

Enforced? yes

Sanctions: N.A.

Requirements on the Target Group

Pre-and post audit need to be conducted to check the performance, if the tax incentive is based on the performance of the project (*1).

Support by Government

  • Assign auditors for pre-and post-audit, and check performance
  • Issue certificate to the business operator once the monitoring and verification by auditor are approved

Implementation Toolbox

Pre-and post-audits are conducted to check the performance, if the tax incentive is based on the performance of the project.

Complexity of Implementation

Government

Only DEDE and auditors monitor the progress.

Target Group

Either tax exemption or tax reduction. Clearly defined target groups.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions • Phase 1 (2006–2007): 193 approved projects. Phase 2 (2008-2009): 127 approved projects, as of 2008 . (APEC, 2011). More specifically from the assessment of the Phase I [4]: • Cost-base (1st phase)  94 facilities received tax breaks  Tax refunded by the government for 140 million THB  Energy saving 375 million THB/yr.  Investment 557 million THB/yr. • Performance-base (1st phase)  94 facilities received tax breaks  Tax refunded by the government for 76 million THB  Energy Saving 856 million THB/yr.  Investment 1,322 million THB/yr. • BOI (1st phase)  37 approved projects  Energy saving 2,459 million THB/yr.  Investment 8,006 million THB/yr.
Estimated costs/benefits for industry No information available
Estimated cost for government No information available

References & Footnotes

References

[1] APERC (Asia Pacific Energy Research Centre), 2011. Compendium of Energy Efficiency Policies of APEC Economies - Thailand. Tokyo. Available at: http://www.ieej.or.jp/aperc/CEEP/Thailand.pdf .

[2] Sinsukprasert, P., 2009. Thailand Clean Energy Policy and Programs. ADB Workshop on Climate Change and Energy March 27th 2009 Intercontinental Hotel, Bangkok. Available at: http://www.adb.org/documents/events/2009/Climate-Change-Energy-Workshop/THA.pdf .

[3] Sinsukprasert, P ,2010. Energy Efficiency and Renewable Energy Financing Measures: Thailand, 1st Expert Group Meeting Global Energy Efficiency 21, Geneva, Switzerland

[4] Krairit Nilkuha, 2010, Energy Efficiency Promotion Policy and Activities in Thailand, Department of Alternative Energy Development and Efficiency, SETatWork workshop

[5] Thailand’s Energy Tax Incentive Program, Technology Promotion Association. Available at http://www.tpa.or.th/tpanew/news/files/SiripornGovTaxIncentive.pdf

[6] Energy Effiiciency Promotion Policy and Activities in Thailand, Krairit Nikuha, Department of Alternative Energy and Development and Efficiency (DEDE), the SETatWork Facilitation Workshop. Feb 2010

[7] Green SME support policies in Thailand, Vinuchada Talangsri, Department of Alternative Energy and Development and Efficiency (DEDE), APEC SME Green Innovation Conference, April, 2011

[8] UNIDO Industrial Energy Efficiency Policy Database, http://ieep.unido.org/ProjectDetails.aspx?PID=21

[9] APEC-EWG, Peer Review on Energy Efficiency in Thailand, 2010, p. 30.

[10] Deloitte (2013). Taxation and Investment in Thailand 2013. Available at http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2013/dttl_tax_guide_2013_Thailand.pdf

[11] GIZ. Financial support programmes for Energy Efficiency in Thailand Available at http://www.giz.de/Themen/de/dokumente/giz2013-en-fritsche-pep-infoworkshop-thailand-eneff-gebaeude.pdf

[12] BOI (2013). Clear time frame for new investment policy announced New policy to become effective in Jan 2015. Available at http://www.boi.go.th/upload/content/2013-05-22%20press%20release%20-%20new%20strategy%20time%20frame%20ENG_80177.pdf