BOI unveils new incentives to counter US tariffs and protect Thailand’s industry

Following the United States’ formal notification of a 36% reciprocal tariff on Thai imports, effective from August 1, 2025, Thailand’s Board of Investment (BOI) is fast-tracking policy responses to mitigate the impact on exports and investment. With the US accounting for 18% of Thai exports, the higher tariff could severely undercut Thailand’s competitiveness—particularly against ASEAN peers like Vietnam (20%), Malaysia (25%), Indonesia (32%), and Singapore (10%).

Narit Therdsteerasukdi, Secretary-General of the BOI, stated that in the two months since the US announced its tariff hike, the BOI has held discussions with both Thai and foreign investors and is now rolling out a new policy package called the “Thai Enterprise Competitiveness Enhancement Measures for the New Global Era.”

The new measures address two key areas:

1. Strengthening Thai SMEs and domestic supply chains

This includes two sub-measures:

1.1 Enhanced support for Thai SMEs to improve operational efficiency

SMEs investing in machinery upgrades, automation, digital technology, energy-saving measures, international sustainability standards, or transitioning into emerging industries will now receive significantly increased tax incentives.

• Previous incentive: 3-year corporate income tax exemption, capped at 50% of investment value
• New incentive: 5-year tax exemption, capped at 100% of the investment in efficiency improvements

1.2 Promotion of local content in EV and electronics manufacturing

Firms in the EV and electronics sectors using Thai-sourced materials and components—under criteria certified by the Federation of Thai Industries’ Made in Thailand (MiT) programme—will receive an additional 2-year 50% corporate income tax deduction.

Eligibility depends on the following local content ratios:

• Battery Electric Vehicles (BEVs): 40% of raw material value
• Plug-in Hybrid Electric Vehicles (PHEVs): 45%
• EV components: 15%
• Household electrical appliances: 40%

2. Reducing risk from US trade measures and regulating investment in certain sectors to protect vulnerable industries and maintain fair competition

This strategy includes three sub-measures:

2.1 Tightening scrutiny of essential production processes

For industries at risk of being affected by US trade measures—such as auto parts, electrical appliances, electronics, metal products, and light industries—clear conditions will be set requiring a significant transformation of raw materials into finished products. This includes a change in customs tariff classification at least at the 4-digit level, to ensure Thai manufacturing for export is recognised and demonstrably beneficial to the country.

2.2 Regulating investment in selected sectors

(1) For low-tech industries vulnerable to US trade measures:

BOI will suspend promotion for the manufacture of solar panels, vehicle accessories, and decorative parts. In some light industries (e.g. furniture, bags, printing), majority Thai ownership will be required—except for projects located in designated Special Economic Zones.

(2) For sectors with excess supply (oversupply):

BOI will suspend promotion for downstream steel products such as all long steel products, hot-rolled steel, thick steel plates, steel pipes, and metal cutting operations.

(3) For activities with environmental or community impact risks:

BOI will suspend land ownership rights for businesses such as metal rolling, drawing, casting, and forging; and for manufacturing metal, chemical, or plastic products. These businesses must be located within industrial estates and be subject to stricter supervision.

2.3 Revising foreign workforce conditions

To ensure clear benefits for Thailand, companies with over 100 employees must employ no less than 70% Thai nationals.

In addition, BOI will set minimum income thresholds for foreign personnel eligible for BOI-related visa and work permit privileges. Executives must earn at least 150,000 baht/month, while experts must earn at least 50,000 baht/month. These measures aim to maintain balance in domestic employment, encourage knowledge transfer to Thai workers, and continue attracting skilled foreign talent to help add value to the Thai economy.

The BOI is also preparing to introduce additional measures to assist businesses potentially affected by the US tariff hike. The focus will be on target industries where Thailand is a key production base for US-bound exports, such as food processing, automotive parts, electronic components, household appliances, machinery and equipment, jewellery, and gemstones.