An indicated area for industrial, logistics, and other business activities operations with no custom duty and VAT on purchase or importation of raw materials, components or finished goods.
It is more suitable for business which involves mainly with import and export of raw material and merchandise.
Basic criteria for setting up
business in FREE ZONE
Since Free Zone is superintended by Customs Department, then, there is certain criteria for a company who wishes to set up its operation there, as follows;
- Business operation of a company must mainly involve with import and export of merchandise.
- The company must be registered in Thailand with capital of at least Five Million Baht.
- The company should install WMS (warehouse management system), or other similar software application, to support warehouse operations. The company is also required to report on inventory available of merchandise or raw materials to Customs Office of every six month for checks and balances purpose.
- The company must install CCTV in the warehouse or factory with record kept up to 2 months.
- After the company is approved to set up its operation in Free Zone, Customs Department will grant a free zone license which costs THB 5,000 for issuing it. Lastly, an annual fee is THB15,000. Please note that the fee rate is subjected to change under Customs’ discretion.
BASIC FLOW OF GOODS
Import Duties, VAT, Excise Taxes, Stamp Duties / Fee
FREE ZONE (BFTZ)
- Manufacturing & Processing
- Regional Distribution Center
- Storage & Warehousing
- Logistics Services
- Finished products
- Imported goods
Including other free zones
Machineries & Equipment
NOT SUBJECT TO:
- IMPORT DUTIES
- EXCISE TAX
- STAMP DUTIES/FEE
- When machinery, merchandise, and etc. are imported into the free zone. They are not subject to imported duty and other taxes as long as they remain in the zone.
- Duties and taxes applied only when brought them out for domestic use.
- A “ZERO” VAT rate is applied for domestic merchandise removed into the zone
REMARK: All privileges are subject to comply with government regulation.
No Import Duties and Internal Taxes
Machinery, equipment, parts, and foreign merchandise imported into the BFTZ are not subject to import duty, as well as value added tax (VAT), excise taxes, including tax stamp and fees as for long it remains in the Zone unless it is brought out of the Zone for domestic use. On the other hand, a “Zero” tax rate is applied to calculate VAT for domestic merchandise removed into the Zone.
Relief from Inverted tariff
Thailand import duty is assessed on the finished product rather than on its individual parts, components or raw material. Manufacturers may find themselves disadvantage when they must pay higher tariff rate on component item or raw material, imported for use in manufacturing process, higher than such finished product. The Free Zone Scheme under the BFTZ corrects this imbalance by treating products made in the Zone, for the purpose of assessment, as it were manufacturing aboard. The BFTZ Program levels the playing field in these circumstances, thereby reducing the component cost and offering substantial Custom duty savings.
Duty Exemption on Re-export
When such foreign merchandise is re-exported from the BFTZ, there is also no duty imposed. The BFTZ has many clients whose ability to compete in regional, particularly the AEC (ASEAN Economic Community), and international markets if they are exempted from duty payments on import merchandise which is subsequently re-exported.
Merchandise in Transit
Foreign merchandise, machinery, and equipment which are imported into Thailand for inspection, repacking, refurnish, recondition, overhaul and so forth then re-export to end buyer with no custom duty.
A vendor located in the BFTZ may sell good to a company in another Zone anywhere in Thailand with no duty paid on goods. Those goods can also be transferred to Project currently receiving BOI-investment privileges without duty on raw or essential materials used in manufacturing of export products.
No Custom duty imposed on labor, overhead, and profit
Which they are attributed to production operations in the BFTZ. If the same production operation were done oversea, the value of the labor, overhead and profit would be subjected to Thai Custom duty. The substantial Custom duty saving may create additional incentives to undertake activity in Thailand rather than in in a foreign country.
Duty Elimination on Waste
When manufacturer conducts its operations within BFTZ, free zone environment, the merchandise is not considered imported, and therefore scrap, waste, or yield loss from an imported component is exempted from import and internal taxes and duties. In addition, Custom duties on defect, damage and obsolete merchandise are significantly reduced or eliminated on those merchandises.
As already mention, no duty payment is required on merchandise brought into the BFTZ unless and until goods enters into domestic. It helps companies with high volume imports or merchandise with high duty rates. That is to say, importing goods into BFTZ would save cash flow from duty referral, reduced risk of fines, penalties, and liquidated damages resulting from non-compliant operations.
Merchandise may be held for exhibition without Customs duty payment. And it may be allowed, by on-site Custom Office, to temporarily exhibit outside the Zone.
Simplification of Import/ Export Procedure
Delays relating to Customs clearances and duty drawback procedures are eliminated. Cash flow savings accrue as well as from simplification of these procedures.