Data Center and Cloud Service in Thailand: BOI Incentives 

How is the Data Center and Cloud Service Market in Thailand?

Data center and cloud service investments in Thailand are increasingly appealing to foreign investors due to the country’s favorable business environment, robust legal framework, and strategic ASEAN location. This industry presents significant opportunities for investors, driven by various factors:

1. Increasing Internet Penetration: 
   • 69.5% of the population using the internet.
   • Government initiatives expanding high-speed networks and providing free Wi-Fi.
   • Growing internet accessibility enhances digital literacy and fuels demand for data centers and cloud services.
2. Booming E-Commerce Sector:
   • Substantial growth in online shopping, digital payments, and content consumption.
   •  High growth in categories like travel, electronics, and food.
   • This trend is expected to continue, driven by high internet and mobile penetration and a diverse range of e-payment options. 
3. Vibrant Digital Ecosystem:
   • Widespread 4G use and upcoming 5G rollout support advanced applications like IoT and smart cities.
   • Government and private sector initiatives foster innovation and support digital businesses.
   • Key organizations: Digital Economy Promotion Agency and National Science and Technology Development Agency.
4. Strategic Location in ASEAN:
   • Excellent connectivity to major markets like Indonesia, Malaysia, Singapore, and Vietnam.
   • Multiple international internet gateways, high-speed broadband access, and extensive submarine cable connections. 
   • The Eastern Economic Corridor (EEC) policy also boosts the investment environment by offering extra support for developing infrastructure, such as utilities and logistics.

Types of Data Center and Cloud Service Business under BOI 

Thailand’s vast digital economy has led to significant growth in the data center and cloud service sectors. These services are under the BOI and are pivotal for businesses looking to leverage digital transformations to drive efficiency and innovation. Here’s a closer look:

1. SaaS (Software as a Service)

• Companies providing SaaS solutions, including email systems, office automation tools, and CRM platforms, can take advantage of BOI incentives. SaaS delivers scalable, ready-to-use applications managed by the service provider, making them perfect for sectors that require effective, easy-to-maintain software solutions.

2. PaaS (Platform as a Service)

• PaaS facilitates the creation and deployment of applications, providing scalability and flexibility. It’s especially well-suited for large-scale applications like analytics, big data systems, and mobile services platforms. BOI incentives can assist companies that offer PaaS solutions in expanding their operations and improving their services.

3. IaaS (Infrastructure as a Service)

• IaaS offers virtual machines and other infrastructure services, allowing businesses to efficiently and economically obtain the hardware resources they require. This category encompasses disaster recovery services and environments suitable for software development and testing. BOI incentives can help lower operational expenses and enhance the scalability of IaaS operations.

What are the BOI incentives under the Data Center and Cloud Service industry?

The Thailand Board of Investment (BOI) offers a range of incentives designed to attract investments in data centers and cloud services. These incentives include:

• Exemption of Import Duties on Machinery: Reduces the initial setup costs by waiving import taxes on equipment needed for data center and cloud operations.
• Corporate Income Tax Exemptions: Provides up to eight years of corporate income tax exemptions, significantly improving the financial viability of projects.
• Non-Tax Incentives: Includes business facilitation services that streamline the setup and operational processes, ensuring a smooth entry into the Thai market.

Is there government support?

Yes, in the data center and cloud service industry, Thailand’s digital infrastructure advancement is backed by several pivotal agencies committed to enhancing the country’s digital economy. These agencies provide comprehensive support spanning from innovation enhancement and technology application to funding for various digital initiatives:

1. Digital Economy Promotion Agency:This agency drives progress in the digital sector by encouraging innovation and the adoption of new technologies, along with providing financial assistance throughout the digital landscape.
2. National Science and Technology Development Agency (NSTDA): NSTDA supports research and development in vital areas such as health, energy, and environmental technologies, aiding in the nation’s scientific progress.
3. National Electronics and Computer Technology Center (NECTEC): Specializing in electronic and computer technologies, NECTEC facilitates the transition of research to industrial applications, helping technological advances benefit the wider economy.
4. National Innovation Agency (NIA): Operating under the Ministry of Science and Technology, NIA energizes the innovation ecosystem, collaborating with various sectors to turn innovative ideas into practical solutions.

What is the Step-by-Step Application Process?

Data center and cloud service businesses in Thailand involve a clear and structured application process. This process ensures that businesses align with local regulations and benefit from the investment incentives offered.

1. Submit the Application: Begin by filing an investment promotion application with the BOI. This initial step requires you to provide a comprehensive business plan, details of the projected investment, and the expected benefits.

2. Register the Entity: Register your business at the Department of Business Development, Ministry of Commerce. During this process, you’ll need to gather and submit all required legal documents needed to operate in Thailand.

3. Obtain the Certificate: Acquire the investment promotion certificate from the BOI, which verifies the approval of your investment and any incentives you’ve been granted.

4. Operationalize Your Site: Secure all necessary permits and licenses, including the Telecommunication Business License from the National Broadcasting and Telecommunications Commission (NBTC).

5. Connect Utilities: Ensure your site has access to essential utilities such as electricity, water, and internet. This step involves coordinating with local utility providers to set up connections.

What are the licenses and permits needed?

For businesses engaged in data center and cloud service operations in Thailand, securing the appropriate licenses and permits is crucial for compliance and successful operation. Here’s a breakdown of the essential licenses and permits needed:

• Telecommunication Business License: Required for data center and cloud service operations. Issued by the NBTC, the license type depends on the nature of the telecommunication network.
  • Type I License: For operators not owning their telecommunication network.
  • Type II License: For private networks with no significant impact on competition.
  • Type III License: For operators owning networks with potential competition impacts.
• Building and Occupancy Permits: Secure these permits from the appropriate local authorities to confirm that the physical infrastructure meets local regulations.
• Utility Connections: Connect with the Provincial or Metropolitan authorities for water and electricity services to ensure uninterrupted operations.

What are the regulatory compliance under the Data Center and Cloud Service industry?

Operating a data center and cloud service in Thailand requires adherence to a range of regulatory standards to ensure compliance and foster a trustworthy business environment. Here’s an overview of the key areas of compliance:

• Data Protection Laws:  Follow the Personal Data Protection Act (PDPA) 2019, which details rules for data processing, consent, and protection. Adhering to PDPA helps businesses responsibly manage personal data and preserve customer trust.
• Labor Laws: Abide by Thai labor laws, covering areas such as working hours, compensation, and employee benefits. This compliance ensures ethical business operations and fosters positive relations with employees.

Thailand provides an excellent environment for data center and cloud service investments, bolstered by its strategic location, advanced digital infrastructure, and attractive BOI incentives. With robust government support and a burgeoning digital economy, investors can confidently develop and expand their operations in line with Thailand’s aim to be ASEAN’s digital hub. At Benoit & Partners, we offer essential legal guidance and strategic insights to help investors effectively navigate the Thai regulatory and business landscapes, ensuring successful and optimized investments in this dynamic sector.