Petrochemical Industry in Thailand: BOI Incentives

What is the petrochemical industry?

The petrochemical industry in Thailand encompasses the production of chemical products derived from petroleum and natural gas. These products are used in various industries including plastics, pharmaceuticals, agriculture, automotive, and textiles. The petrochemical industry in Thailand is a cornerstone of the nation’s industrial sector, originating in the 1970s with the discovery of significant natural gas reserves in the Gulf of Thailand. This discovery led to the launch of the Eastern Seaboard Project, which has since attracted substantial public and private investments. The industry consists of several key segments:

• Basic Petrochemicals: Including olefins (ethylene, propylene) and aromatics (benzene, toluene, xylene).
• Intermediate Petrochemicals: Such as styrene, phenol, and methanol.
• Downstream Petrochemicals: Including polymers (polyethylene, polypropylene, polystyrene), synthetic fibers, and synthetic rubber.

What are the BOI incentives for the petrochemical industry in Thailand?

The Board of Investment (BOI) offers a variety of incentives to encourage investment in the petrochemical industry in Thailand. These incentives are designed to reduce operational costs and enhance profitability for investors.

Tax Incentives

• Corporate Income Tax Exemption: Up to 8 years for projects meeting specific criteria, such as those using advanced technologies or contributing to environmental sustainability.
• Import Duty Exemption: On machinery and raw materials necessary for production.
• Additional Tax Reductions: Including a 50% reduction in corporate income tax for five years after the initial exemption period.

Non-Tax Incentives

• Land Ownership Rights: Foreign companies can own land for their operations.
• Visa and Work Permit Facilitation: Streamlined processes for obtaining visas and work permits for foreign experts and employees.
• Enhanced Support for Research and Development: Including financial grants and support for collaborative R&D initiatives. 

What are the specific BOI incentives for each product in the petrochemical industry?

The BOI offers various incentives for specific chemical products in the petrochemical industry in Thailand. These include:

1. Oil Refinery:

• Incentives:
  • Import duty exemption on machinery.
  • Import duty exemption on raw materials.
  • Non-tax incentives

2. Natural Gas Separation Plant:

• Projects using Carbon Capture Utilization and Storage (CCUS) technology.
• General cases.
• Incentives:
  • CIT exemption for 8 years for CCUS projects, and 5 years for general cases.
  • Import duty exemption on machinery.
  • Import duty exemption on raw materials.
  • Non-tax incentives

3. Petrochemicals:

• Projects using Carbon Capture Utilization and Storage (CCUS) technology.
• General cases.
• Incentives:
  • CIT exemption for 8 years for CCUS projects, and 5 years for general cases.
  • Import duty exemption on machinery.
  • Import duty exemption on raw materials.
  • Non-tax incentives.

4. Specialty Polymers or Specialty Chemicals:

• Incentives:
  • CIT exemption for 8 years.
  • Import duty exemption on machinery.
  • Import duty exemption on raw materials.
  • Non-tax incentives.

Is there government support?

The petrochemical industry in Thailand benefits significantly from government support, including various initiatives and programs aimed at boosting investment and technological progress. The Thai government, through the Board of Investment (BOI), encourages research and development (R&D) activities in the chemical sector by providing grants and funding for collaborative projects. This support is vital for technological advancement and maintaining competitiveness. Additionally, significant investments are made in infrastructure, such as developing industrial zones and science parks that offer modern facilities and logistical support.

What is the step-by-step process for investing in the petrochemical industry?

Investing in the petrochemical industry in Thailand involves several key steps, from the initial application to operational setup:

1. Initial Application and Consultation

•  Investors start by consulting with the Board of Investment (BOI) to understand available incentives and requirements. This step includes submitting an investment promotion application that outlines the project details.

2. Approval and Licensing

•   Once the application is approved, investors need to obtain the necessary licenses and permits, including environmental and safety assessments. Key steps include:
  • Submitting Detailed Project Plans: Including environmental and safety considerations.
  • Receiving BOI Approval: For the proposed investment and project scope.

3. Construction and Setup

•  With the licenses secured, investors can proceed with the construction of their facilities. This phase includes importing machinery and raw materials, benefiting from the BOI’s duty exemptions.

4. Recruitment and Training

•  Recruiting skilled labor and providing necessary training are crucial for operational efficiency. The BOI supports this through various training grants and programs.

5. Commencement of Operations

• After completing the setup, companies can begin operations, leveraging BOI incentives to optimize their production processes and reduce costs.

What are the licenses and permits needed?

To operate in the petrochemical industry in Thailand, companies must obtain specific licenses and permits, including:

• Factory Operation License: Needed to establish and run a manufacturing facility.
• Environmental Impact Assessment (EIA): Mandatory for projects that could impact the environment.
• Hazardous Substances License: Required for handling and storing hazardous chemicals.
• Safety and Health Permits: Ensure compliance with safety and occupational health standards.
• Import and Export Licenses: Needed for the movement of raw materials and finished products.

The petrochemical industry in Thailand, supported by BOI incentives, offers a lucrative opportunity for investors. With substantial tax and non-tax benefits, robust infrastructure, and comprehensive government support, Thailand continues to be an attractive destination for petrochemical investments. For legal compliance and detailed guidance on investing in Thailand’s petrochemical sector, Benoit & Partners provides expert consultation and support to ensure a smooth and successful investment journey. For more detailed guidance and personalized assistance, contact us and let us help you understand and navigate the complexities of investing in Thailand’s chemical industry under BOI incentives.