Thailand’s IEAT vs BOI: A Strategic Guide for Foreign Manufacturers

Foreign industrial companies. eyeing Thailand must navigate two major investment schemes – the Industrial Estate Authority of Thailand (IEAT) and the Board of Investment (BOI). Each scheme offers distinct incentives, from tax holidays to land ownership rights, and choosing the right path (or a combination) can significantly impact a project’s success. In this guide, we define IEAT and BOI, compare their key features (tax incentives, land and ownership, operational control, foreign ownership allowances, customs benefits), and provide scenarios illustrating when each scheme is ideal. We also explore how combining IEAT and BOI can unlock greater flexibility through incentive stacking. The goal is to offer clear, actionable insight in a direct tone – building trust with corporate decision-makers considering Thai expansion.

What is IEAT? (Industrial Estate Authority of Thailand)

The Industrial Estate Authority of Thailand (IEAT) is a government agency that develops and manages industrial estates across Thailand. Its core function is to establish designated industrial zones with ready infrastructure and streamlined regulations to attract manufacturers. Companies setting up in an IEAT industrial estate enjoy unique operational benefits. Notably, foreign manufacturers can own land within these estates – a significant advantage, as Thai law generally restricts foreign land ownership (the IEAT Act provides an exception allowing 100% foreign land ownership inside industrial estates for industrial use). IEAT estates often include “Free Zones” (formerly export processing zones) where goods imported for manufacturing export are treated as outside Thai customs territory. This means duty-free and VAT-free import of raw materials and equipment as long as they remain in the zone or are exported. The IEAT also offers one-stop services in many estates, assisting with permits, utilities, and environmental regulations on-site. In summary, IEAT’s mandate is location-based: it creates industrial havens with logistical and regulatory perks to facilitate manufacturing operations.

What is BOI? (Thailand Board of Investment)

The Board of Investment (BOI) is Thailand’s principal investment promotion agency, focusing on nationwide incentives for priority industries. BOI’s core function is to grant “investment promotion” status to qualifying projects, which comes with an array of tax and non-tax incentives to encourage foreign investment. Key BOI benefits include corporate income tax (CIT) exemptions for a set number of years (often 5–8 years depending on the promoted activity), exemption of import duties on machinery and on raw materials used in export production, and facilitation of visas and work permits for foreign staff. A BOI-promoted company can usually be 100% foreign-owned, even in sectors otherwise restricted under the Foreign Business Act, because BOI promotion confers an exemption to such restrictions. (For example, purely domestic retail is not promoted by BOI – e.g., BOI will not cover a retail pharmacy business – but most manufacturing activities and many service/tech sectors are eligible.) BOI promotion also allows a foreign company to own land for the approved project (such as a factory site), which is typically not permitted without BOI or IEAT privileges. In essence, BOI incentives are tied to what your project is (the industry, technology, and investment size), rather than where it’s located. A promoted project can operate anywhere in Thailand – giving investors flexibility if they need a specific location – while still enjoying generous incentives and government support.

Comparing Key Features: IEAT vs. BOI

Both IEAT and BOI aim to attract investment but offer different advantages. Below is a comparison of key features and incentives:

Tax Incentives

• BOI Tax Holidays: BOI promotions offer significant tax incentives, notably CIT exemptions for a number of years (up to 8 years for top-tier projects). This means a BOI-promoted manufacturing company could pay 0% corporate income tax on net profits for the granted holiday period. BOI may also grant a 50% CIT reduction for several years beyond the holiday in certain cases, plus extra deductions (e.g. double deduction for transportation, electricity, and water costs) if criteria are met. These tax benefits directly boost after-tax profits for eligible projects.

• IEAT Tax Treatment: IEAT by itself does not grant corporate tax holidays – companies in an industrial estate pay normal corporate income tax on profits unless they separately obtain BOI promotion. However, if operating in an IEAT Free Zone, a company effectively defers import-related taxes: imported raw materials and components used in production are not subject to import duty or VAT as long as the finished goods are exported. If products are sold domestically, duties/VAT then apply at the time of withdrawal from the zone. In short, IEAT aids with customs tax savings, whereas BOI directly cuts corporate tax.

Customs and Import Duty Benefits

• BOI Import Duty Exemptions: A BOI-promoted project typically receives an exemption of import duties on machinery for setting up the factory. It also exempts import tariffs on raw materials and components used in export production for a specified period (e.g. 1–5 years, extendable). This is valuable for manufacturers importing parts – if you export the finished goods, those inputs enter tariff-free under BOI approval. For products sold domestically, BOI rules generally require paying applicable duties (or obtaining approval under a separate scheme) on imported inputs.

• IEAT Free Zone Advantages: In IEAT Free Zones, the customs benefits are broader in scope and duration. All materials, machinery, and goods imported into the zone are immediately duty-free and VAT-free, without a time limit, because legally they haven’t “entered” Thailand’s customs territory. This status simplifies logistics – on-site customs officers allow fast-track import/export clearance within the estate. If the company exports its entire output, it may never incur import duties or VAT on inputs. For any finished goods taken out for domestic Thai market, import duties and VAT become payable (as if importing at that point). Essentially, IEAT provides a continuous bonded warehouse environment, whereas BOI provides a fixed-term duty exemption for export purposes. Companies that rely heavily on imported inputs often find the IEAT free zone invaluable for reducing upfront tax and paperwork on imports.

Land Ownership Rights

• Foreign Land Ownership: Under Thai law, foreign companies generally cannot own land. BOI promotion and IEAT estates are two notable exceptions. A BOI-promoted company is allowed to purchase and own land needed for the promoted industrial project (e.g. to build a factory or warehouse). Similarly, companies (even 100% foreign-owned) that locate in IEAT industrial estates can directly own or lease long-term land plots within the estate for their facilities. This means that a foreign manufacturer has a path to land ownership in Thailand either by securing BOI status or by situating in an IEAT-developed zone. Without one of these schemes, most foreign investors would be limited to leasing land or using Thai nominees. The ability to hold land title via these programs gives investors more control and asset security for major projects.

• Operational Control of Premises: Owning land in an IEAT estate also means the site is already zoned for industry – investors face fewer zoning hurdles and community resistance. BOI, on the other hand, doesn’t provide a pre-zoned location but lets you choose the site; you must ensure the land (if not in an industrial estate) is properly zoned for factory use and handle any local permits. In both cases, the foreign firm can fully control its operations on the land it owns under the scheme, but IEAT offers a more structured environment (with estate management handling common infrastructure).

Foreign Ownership & Corporate Control

• 100% Foreign Shareholding: Both IEAT and BOI schemes accommodate 100% foreign-owned companies. In fact, most manufacturing activities are not on Thailand’s restricted business list, so a foreign manufacturer can usually be fully owned regardless. For example, Thai law does not require a Thai shareholder for an export-oriented factory – foreign investors can own the business outright. BOI promotion explicitly allows full foreign ownership even in some activities that would otherwise need special permission (it acts as an automatic Foreign Business License for the promoted scope). IEAT doesn’t directly issue licenses related to foreign ownership because simply engaging in manufacturing (especially for export) is generally permitted for foreigners. The bottom line: both schemes let you maintain complete equity and management control of your company. There is no requirement under IEAT or BOI to have a Thai partner, which is a critical point for investors who need full control over technology or operations.

• Management and Operational Oversight: With BOI, operational control remains with the company, but BOI does impose certain project conditions – e.g. you must invest a minimum capital, commence operations by a set timeline, and report periodically to BOI to maintain your status. IEAT imposes compliance of a different sort: companies in industrial estates must follow estate regulations (often related to environmental protection, safety, and utilities use) and, if in a free zone, must adhere to customs control procedures (inventory tracking, bonded warehouse rules). However, neither scheme places day-to-day management under government intervention – the company is free to manage its production as it sees fit. In fact, BOI and IEAT both aim to facilitate operations (through services like one-stop service centers) rather than interfere. BOI companies benefit from streamlined work permit processes (no strict Thai-to-foreigner employment ratio requirements for work permits, unlike ordinary firms). IEAT companies benefit from on-site IEAT offices that can help coordinate permits and problem-solve within the estate. In sum, both programs enhance a foreign investor’s ability to operate in Thailand with relatively few restrictions, while maintaining compliance with Thai laws and regulations.

Customs & Regulatory Support

(Beyond taxes and ownership, there are practical operational supports worth comparing.)

• One-Stop Services: A BOI-promoted company has access to the One Stop Service Center for Visas and Work Permits, expediting immigration processes for foreign staff. BOI also can assist in coordinating approvals from other agencies (e.g. environmental impact assessments, factory licenses) as part of its facilitation. IEAT, on the other hand, often provides one-stop centers within large industrial estates for various permits (factory construction approvals, power/water hookups, local regulatory compliance). Being in an IEAT estate can simplify regulatory interactions since IEAT officials help liaise with departments like the Ministry of Industry or Customs on the company’s behalf.

• Infrastructure & Utilities: IEAT estates are typically equipped with high-quality infrastructure – reliable power supply, water treatment facilities, waste management systems, and internal logistics (good roads, sometimes even port access in certain estates). This means an IEAT investor can plug into an established industrial ecosystem. A BOI project located outside an industrial estate would need to arrange its own access to industrial-grade utilities and comply with local municipality regulations, which could be more effort. Thus, IEAT shines in offering a ready industrial environment, whereas BOI shines in offering mobility and choice of location with the trade-off of self-arranged infrastructure.

Ideal Use Cases: When to Choose IEAT or BOI

Both IEAT and BOI have their ideal applications. Depending on a company’s goals, one scheme may be more advantageous than the other. Here are scenarios where each scheme excels:

When IEAT is Ideal

• Export-Driven Manufacturing: If your business will export the majority of its output and relies on imported raw materials or components, an IEAT Free Zone is highly advantageous. For example, a mid-sized tool manufacturer importing castings and exporting finished power tools would benefit from duty-free, VAT-free import of parts and hassle-free customs in the zone. The more you import and export, the more IEAT’s ongoing customs savings outperform any temporary incentives.

• Ready Infrastructure & Speed to Market: Companies that want a fast start-up with minimal red tape often choose IEAT estates. The industrial land is pre-zoned and comes with ready utilities, so you can build a factory faster. Permitting for construction and operation is smoother through the estate’s one-stop center. If, say, CHU Power Tools needed to begin production within a tight timeline, leasing a factory in an IEAT estate could save months compared to buying raw land elsewhere.

• Land Ownership Without BOI: If your project doesn’t qualify for BOI tax incentives (or you prefer not to apply) but you still want to own land and operate long-term in Thailand, IEAT is a viable route. For instance, a foreign automotive parts supplier might not meet BOI’s specific promotional criteria but can still purchase land and set up in an industrial estate, ensuring full control of its facility and the ability to mortgage or sell the property interest if needed.

• Clustering and Logistics Advantages: Some industries benefit from being near suppliers or ports. IEAT estates are often strategically located (e.g. near deep-sea ports, highways, or in industrial clusters like the Eastern Seaboard). If your operations value proximity to logistical hubs or industry peers (for supply chain or JIT manufacturing reasons), choosing an IEAT estate in that area is ideal. The estate environment also often provides shared facilities (wastewater treatment, security, firefighting units) which can lower operational headaches for individual factories.

When BOI is Ideal

• Tax-Sensitive, High-Profit Projects: If your financial projections show substantial profits in the first 5–8 years, securing a BOI tax holiday can yield massive savings. For example, a high-tech electronics manufacturer expecting large earnings would save 20% corporate tax on those profits for multiple years under BOI, directly improving ROI. BOI is ideal when corporate tax exemption is a key driver for project feasibility.

• Projects in Priority Sectors or Tech-Driven Industries: BOI actively promotes certain sectors (e.g. advanced manufacturing, renewable energy technology, aerospace, biotech). If your project falls into these categories, BOI not only offers maximum incentives but also signals government support. A company manufacturing next-generation automotive components or doing significant R&D in Thailand would find BOI promotion aligning with its innovation investment (sometimes BOI even grants additional incentives for R&D, workforce training, or locating in special zones).

• Maximum Flexibility in Site Selection: Sometimes the best factory location is not within a traditional industrial estate – it could be closer to raw material sources or in a province where an estate is not available. BOI is ideal in such cases: you can build your plant anywhere in the country and still enjoy the incentives. For instance, an agribusiness processor might need to be near farms in a remote province; BOI incentives will apply there, whereas IEAT estates might be too far away or nonexistent in that area.

• Ease of Doing Business (Visas & Permits): For companies that will bring in several foreign experts or managers, BOI simplifies the process of obtaining work permits and visas. There’s no formal requirement to hire four Thai employees per work permit (a rule that unpromoted companies face). If your operation requires, say, a team of specialist engineers from abroad, BOI promotion spares you from the typical ratio constraints and provides fast-track visa services. This makes BOI ideal for tech-intensive projects where foreign talent is needed on the ground.

• Domestic-Focused Manufacturers with Eligible Products: Unlike IEAT, which mainly benefits exporters, BOI can be worthwhile even if you plan to sell mostly into the Thai domestic market, provided your product is on the promoted list. For example, a foreign company manufacturing medical devices for the Thai market could get BOI incentives (tax holiday, etc.) even with minimal exports. You won’t get raw material import duty breaks for domestic sales, but the corporate tax cut and other benefits still apply, making your local-market venture more competitive.

Combining IEAT and BOI: Stacking Incentives for Flexibility

Far from being mutually exclusive, IEAT and BOI schemes can be combined to maximize benefits. In fact, many large foreign manufacturers pursue both in order to **“stack” incentives:

• Tax Holiday + Free Zone: By obtaining BOI promotion and also situating your factory in an IEAT Free Zone, you unlock both levels of advantage. For example, imagine a company sets up in a free zone with BOI status. It could import machinery and raw materials without duty under both schemes (BOI gives duty-free import of machinery, IEAT Free Zone covers duty-free import of all production inputs). The company’s profits could be shielded by a BOI 5-year tax holiday, and its day-to-day cash flow benefits from never paying VAT/duty on imported parts used for export production. This one-two punch dramatically lowers operating costs in the critical early years of the investment.

• Extended Incentive Timeline: BOI tax holidays are time-limited (they expire after X years). IEAT Free Zone benefits, however, continue indefinitely as long as you operate in the zone. Combining them means you enjoy maximal tax savings up front when profits are small (via BOI’s CIT exemption) and then, even after the BOI tax holiday lapses, you still save on duties and VAT for ongoing operations in the free zone. It’s a way to smooth out benefits across the project lifecycle.

• Strategic Flexibility: Having both BOI and IEAT status provides flexibility if business conditions change. Suppose your BOI promotion requires you to export at least 50% of output to get raw material duty exemption, but later you shift to domestic sales – your IEAT Free Zone can cover duty deferral on imported materials until the point of domestic sale, softening the impact. Conversely, if you start in a free zone but later decide to expand outside the estate, your BOI status still gives you nationwide privileges. Dual status ensures you’re not reliant on a single scheme’s rules for every aspect of operation.

• Easier Compliance Through Complementarity: Thailand’s policy framework is designed so that BOI and IEAT complement each other. In fact, the government often encourages BOI-promoted projects to locate in industrial estates (there have even been additional BOI incentives for investing in certain zones). Administrative compliance for dual-status companies is manageable: you will report to BOI on promotion conditions (e.g. submitting proof of investment, production reports for tax exemption) and separately manage customs inventory and estate regulations for IEAT. While this is an extra workload, both IEAT and BOI have support teams to assist businesses. Many foreign firms feel the combined benefits far outweigh the compliance effort.

In short, combining IEAT and BOI can unlock a high degree of strategic flexibility. It lets a company optimize both tax structure and operational logistics, which is particularly valuable for mid-to-large scale manufacturers who intend to be in Thailand long-term. The key is to plan early – apply for BOI promotion and secure an appropriate plot in an IEAT estate in parallel, to align the requirements of each scheme from the start.

Practical Considerations for Investors

Finally, companies should weigh the following practical considerations when deciding on IEAT, BOI, or both:

• Export Ratio Requirements: IEAT Free Zones are designed for exporters – typically, authorities expect a substantial majority of output (often ~70% or more) to be exported to grant and maintain free zone status. If your export ratio falls too low, IEAT may revoke free zone privileges. BOI promotions today generally do not require a fixed export percentage (Thailand lifted many export requirements to comply with WTO); you can get BOI incentives even for domestic-oriented projects. However, note that BOI’s import duty exemption on raw materials applies only to materials used in export manufacturing. A BOI firm that sells domestically will have to pay duties on its imported inputs (or join a duty drawback scheme), whereas an IEAT free zone firm can defer those duties until the point of sale. Bottom line: If your business model is largely export, IEAT adds great value; if largely domestic, BOI may be more suitable (you could still use IEAT for land ownership, but the free zone duty benefit would be underutilized).

• Location Constraints & Opportunities: Choosing IEAT ties you to specific industrial estates. Thailand has many IEAT or IEAT-supervised estates (especially in the Eastern Economic Corridor and around Bangkok), but not every province has one. You’ll need to locate within an approved zone to get IEAT benefits, which might mean higher land costs or being farther from certain local resources. BOI gives you nationwide choice – you can invest in rural provinces, closer to raw materials or labor pools, or wherever makes business sense. Additionally, BOI sometimes provides extra incentives for projects in lesser-developed areas or special zones, sweetening the deal if you go to those locations. Consider where your suppliers and customers are: if an IEAT estate is conveniently near a port or city you need, great; if not, BOI might be the only way to get incentives in your preferred location. Some investors even split operations – e.g. maintaining a free-zone facility for exports and another BOI-promoted facility outside for domestic distribution – to optimize both geography and incentives.

• Licensing Process & Timeline: Engaging with BOI and IEAT involves separate application processes. BOI application entails submitting a detailed investment plan and feasibility study; approval can take anywhere from 1 to 3 months (longer for very large projects that require Board committee approval). After approval, you must incorporate the company and meet certain milestones (e.g. bring in capital, start operations within 2-3 years). IEAT setup requires either buying/leasing land in an industrial estate and (if seeking free zone status) applying to IEAT for your zone designation. The free zone approval usually comes after you have a factory building plan, since the zone must be a defined area of your facility. This process can also take a few months and requires demonstrating your export-oriented plan. It’s often possible to pursue BOI and IEAT tracks in parallel – for instance, apply for BOI promotion while negotiating an industrial estate plot. Many companies secure BOI first (to know they’ll get the tax break) and then finalize the land; others commit to an estate and then use that location as part of their BOI application. From a timing perspective, be prepared for a multi-step journey and start early. Also, factor in construction time if you’re building a new plant (estates may have some ready-built factories for lease, which could cut timeline).

• Compliance and Administrative Overhead: With great incentives comes ongoing compliance. A BOI-promoted company must file regular reports to the BOI (usually annually) to confirm it’s meeting conditions (like not exceeding BOI-imposed limits on certain local sales if any, or maintaining at least the investment level promised). There may also be audits if you claim a lot of tax exemption, to ensure eligibility. An IEAT free zone company must implement strict inventory control systems to track goods in and out of the zone. Customs authorities require monthly reporting of imports, exports, and any transfers to the domestic market. This might necessitate additional staff or an IT system to manage, as well as periodic inspections. Companies should weigh the cost of this administration. Generally, larger exporters find the cost negligible relative to duty savings, while very small firms might find free zone administration too burdensome unless they have sufficient volume. It’s possible to hire logistics providers to manage customs paperwork if needed, and IEAT’s local offices often assist with compliance training. The key is to stay organized: missing a BOI report or mismanaging free zone records could jeopardize your incentives.

• Legal and Regulatory Nuances: When planning, consult legal experts on specifics like permitted activities and scope. For example, BOI promotions specify exactly which activities are incentivized – if you add a new manufacturing line not covered in your BOI certificate, you might need a modification approval to get it under incentive. Similarly, IEAT free zones have rules about mixing domestic and export activities (you might need a clearly separated warehouse for domestic-bound goods, etc.). Ensure your corporate structuring aligns too: e.g. if you plan to have a trading arm and a manufacturing arm, decide which entity gets BOI or IEAT, or if you need two entities (one might be BOI-promoted factory, another a local sales distributor). Planning these aspects upfront will save headaches down the line.

• Costs and Fees: Both schemes come with some fees. BOI has an application fee and annual fees during the tax holiday period (usually modest relative to the tax savings). IEAT will involve costs to purchase or lease industrial estate land (which can be higher than buying regular industrial land due to the estate premium) and may include estate maintenance fees. Budget for these and compare against the benefits. For instance, IEAT land might cost more per square meter, but if it saves you millions in duties and provides reliable infrastructure, it’s worth it. Always perform a cost-benefit analysis: how do the tax/duty savings compare to the compliance and land costs? In most cases for sizeable manufacturing ventures, the scales tip in favor of utilizing the incentives.

Roundup

Thailand offers a flexible toolkit of incentives for foreign manufacturers – the IEAT and BOI schemes are at the center of this strategy. Understanding their differences is crucial: IEAT is about where you operate (in an industrial zone that simplifies operations and trade), while BOI is about what you do (the promoted activities that Thailand wants to foster). Many successful investors use both in tandem to cover all bases. Ultimately, the choice should align with your company’s strategic needs: Do you prioritize a tax holiday to boost early profits? Is duty-free import of parts central to your cost structure? Do you need to own land or bring in many expats? By asking these questions and leveraging the right scheme, companies and other foreign investors can confidently craft an optimal market entry strategy for Thailand. With careful planning – and often with guidance from local investment advisors – you can maximize incentives while ensuring compliance, setting the stage for a smooth and profitable expansion in Thailand’s manufacturing landscape.