Thailand bets big by cutting out income taxes for VCs and extending the same benefits to new startups
In a massive effort to reboot the country’s tech economy, Thailand is waving income tax and dividend taxes on VC firms for the next ten years, it was reported recently. The Ministry of Science and Technology will simultaneously launch a 500 million baht ($14.2 million) fund of funds for Thai startups.
“The government will be establishing a dedicated asset management firm to manage the fund, which will be directed mainly at technology businesses within the 10 core industries,” said Minister of Science and Technology Pichet Durongkaveroj. The fund of funds (FoF) will apply to some very specific verticals: smart cars, robotics, medical tourism, digital health, agritech, biotech, aviation, biofuels and food.
This appears to be a separate initiative to a much larger planned fund reported by the Bangkok Post and the Nation (Thailand’s Independent Newspaper) in April, which expected two funds totaling 20 billion baht (over $570 million) to launch: a $285 million Digital Economy Fund and an equally large fund from the Ministry of Finance for various verticals.
For this smaller FoF, the government will hold no more than a 50% stake in each of the FoF’s funds. The minister also added he was trying to push two new bills that would make technology sharing easier in Thailand, letting startups build on the work of existing patents. The measures would also include access to more government grants.
The tax law will apply to contributors to VC funds and will also apply to any new businesses set up between October 1, 2016 and December 31, 2016.
“The government hopes to encourage VCs to have a part in the development of the business sectors,” added Durongkaveroj, “which will not only help to establish a digital market base in Thailand, but also to help hasten its growth as well.”
The scheme fits into the SMART THAILAND 2020 digital economy initiative that include plants to convert Phuket and Chiang Mai into smart cities as well as expand internet penetration beyond (the current) 50% of the country. Other projects revolve around edtech, e-government and e-commerce.
India announced a massive $15 billion fund for its multi-city ecosystem earlier this year. Other governments have created FoFs before, including Estonia, Latvia and Lithuania. Some U.S. states, like Utah, have also launched them.