Comparing EEC-BOI privileges - What will Asia Era One get to pursue the high-speed train project
Prachachat Business News, May 22, 2024 - 4:28 PM
"Asia Era One", the winner of the auction for the high-speed rail project connecting 3 airports worth over 224,544 million baht, will not plead for a BOI promotion card after tomorrow's May 23, 2024 deadline. Instead, it will seek EEC privileges which may be better.
On May 22, 2024, Mr. Chula Sukmanop, Secretary-General of the Office of the Eastern Economic Corridor Policy Committee (EEC), said:
As he had previously told Prachachat Business News and reiterated several times, the high-speed rail project connecting 3 airports (Don Mueang, Suvarnabhumi, U-Tapao) or the high-speed train must definitely happen. Even if Asia Era One Co., Ltd., the winner cancels the contract, the state must find a new investor through another auction. This may delay the project by 1.5-2 years, but he affirmed that the high-speed train must proceed no matter what.
At the same time, Asia Era One Co., Ltd. needs to apply for BOI promotion and issuance of a promotion certificate as it is a requirement in the project contract. If Asia Era One does not apply for the BOI promotion, it can seek EEC privileges instead, which would require renegotiation of the contract terms.
However, comparing the privileges between the EEC and BOI, the EEC offers 14 tax incentives. The most special is case-by-case negotiation. These include:
1. Corporate income tax exemption for net profits from operations for 1-15 years. This exemption may be granted as a percentage of investment capital, excluding land and working capital.
2. 50% reduction of corporate income tax rate from the normal rate for 1-10 years (if the operator does not receive corporate tax exemption). And 50% reduction for 1-5 years after the tax exemption period ends (if the exemption period is not over 8 years).
3. Annual losses incurred during the corporate tax exemption period can be deducted from net profits for up to 5 years after the exemption period ends.
4. For operators not receiving tax exemption or reduction, 1-70% of total investment expenditure can be deducted from net profits in addition to normal depreciation.
5. Transportation, electricity and water supply costs can be deducted at double the amount normally allowed as business expenses.
6. 1-25% of total investment expenditure can be deducted from net profits of one or multiple years within 10 years from earning operating income, in addition to normal depreciation.
7. Dividends from businesses granted corporate tax exemption are also exempt from including in calculations for dividend tax during the exemption period and 6 months after.
8. Goodwill, licenses or other commercial rights need not be included for tax calculation for 5 years from earning operating income.
9. Import duty exemption for machinery
10. Import duty exemption for goods imported for R&D and related testing
11. Import duty exemption for raw materials and essential inputs imported for producing, assembling or manufacturing goods for export according to conditions, procedures and periods specified.
12. Up to 90% reduction of import duties on raw materials or essential inputs for production under approved projects for periods not over 1 year.
13. Import duty exemption for goods to be re-exported according to specified conditions, procedures and periods.
14. Export duty exemption for products or outputs produced or assembled by operators according to specified conditions, procedures and periods.
Non-tax privileges include: 1) Right to own land in the EEC for approved operations, 2) Right to own residential units for business or residential purposes in the EEC, 3) Right to bring in foreign experts, executives or specialists along with spouses and dependents to stay according to specified numbers and periods, 4) Foreign experts, executives and specialists can work under an EEC Work Permit approved by the Secretary-General.
As for BOI privileges under the Investment Promotion Act 2017 and the Competitive Enhancement Act for Target Industries 2017, a special right is to "allow foreigners to study investment opportunities beforehand". If they show good performance and likelihood of expanding investment, their stay can be extended.
But the key BOI privilege investors get is corporate income tax exemption based on the BOI's business categories divided into 6 groups. A1+ grants 10-13 year exemption (unlimited amount + non-tax rights), A1 8 years (unlimited + non-tax), A2 8 years (+ non-tax), A3 5 years (+ non-tax), A4 3 years (+ non-tax), B only import duty exemptions on machinery, raw materials for R&D and non-tax rights like land ownership.
Tax privileges include reducing import duties on machinery and essential raw materials, exempting duties on goods for R&D, exempting corporate income tax and dividend tax, reducing 50% corporate tax, double deductible transport/utility costs, deducting 25% of installation/construction costs, and exempting duties on raw materials/inputs for export production.
Non-tax privileges allow bringing in foreign technicians/experts to work in promoted businesses, owning land, remitting foreign currency, etc.
There are also privileges for enhancing competitiveness through investment in technology/innovation and human resource development - granting 200% corporate tax exemption on that investment/expenditure.
Plus additional privileges based on location e.g. industrial estates, EEC zone, special economic zones (SEZs) or 20 low-income provinces.
The BOI also has a special measure under the Competitive Enhancement Act allowing up to 15 years' corporate tax exemption, support from a 10 billion baht fund for R&D and personnel development expenditure in target industries, subject to proper criteria and providing good value.
**SRT Proposes Extension of Two Thai-Chinese Railway Contracts for Nava Nakhon-Cheang Rak Noi Maintenance Center**
*Source: Manager Daily 360 Degrees*
**Thursday, May 23, 2024, 04:10**
Manager Daily 360 Degrees reports that the State Railway of Thailand (SRT) has proposed to its board to extend the construction timelines for two civil engineering contracts of the Thai-Chinese railway project. The delays are due to the late handover of construction sites.
The contracts in question are:
1. **Contract 4-3**: Covering the civil engineering work from Nava Nakhon to Ban Pho, a distance of 23 kilometers, with a budget of 11.525 billion baht. The contract, managed by the CAN joint venture (China State Construction Engineering Corp, AS Associate Engineering (1964) Co., Ltd., and Nawarat Patanakarn Public Co., Ltd.), is proposed to be extended by 163 days, moving the completion date from August 13, 2024, to January 23, 2025. As of April 2024, the project is 31.56% complete, lagging behind the planned 98.75% completion.
2. **Contract 4-4**: Involves the civil engineering work for the Cheang Rak Noi Maintenance Center, with a budget of 6.573 billion baht. The contract, managed by Italian-Thai Development Public Co., Ltd., is proposed to be extended by 355 days, shifting the completion date from September 10, 2025, to August 31, 2026. By April 2024, the project is 10.44% complete, significantly behind the planned 63.77% completion.
The SRT board, chaired by Mr. Chirut Visalchit, will review and potentially approve these extensions in their meeting on May 23, 2024.
Previously, the SRT board approved extending Contract 3-2 (covering the Muak Lek and Lam Takhong tunnels) by 431 days, pushing the completion from April 3, 2024, to June 7, 2025. This delay was also due to the late handover of the Khlong Phai tunnel area at Lam Takhong, with Nawarat Patanakarn Public Co., Ltd. handling the construction.
The Thai-Chinese high-speed railway project (Bangkok to Nakhon Ratchasima phase), spanning 253 kilometers, is divided into 14 contracts. Two contracts have been completed, ten are under construction, and two are expected to begin this year. As of April 2024, the overall progress of civil engineering work stands at 32.867%, falling short of the planned 66.337%.
**Revamping the "High-Speed Rail Linking 3 Airports" Contract: Ignoring BOI, Requiring CP to Place a 128 Billion Baht Guarantee | Daily News**
Source: Daily News Website
Thursday, May 23, 2024, at 16:36
The SRT Board acknowledged the initiative to amend the contract for the high-speed rail project linking three airports, disregarding BOI's stipulations and requiring CP Group to place a 128 billion baht financial guarantee to ensure construction progresses smoothly. Payments to the private sector for construction will be expedited. The proposal will be presented to the Eastern Economic Corridor Policy Committee (EECP) for approval. If the new contract is signed, SRT will issue the Notice to Proceed (NTP) this year, aiming to commence construction and open for service by 2029.
Anan Pho-nim-daeng, Deputy Governor of the State Railway of Thailand (SRT), revealed that the SRT Board approved in principle the resolution of issues with the high-speed rail project linking three airports (Don Mueang, Suvarnabhumi, and U-Tapao). This decision was influenced by the COVID-19 pandemic, the Russia-Ukraine war, and the financial system crisis. The project will remove the investment promotion benefits with the Board of Investment (BOI) and require the concessionaire, Asia Era One Co., Ltd. (CP Group), to provide a financial guarantee (Bank Guarantee) in two parts totaling approximately 128 billion baht: 9 billion baht for the Airport Rail Link management rights and 119 billion baht for state co-investment in the project (PIC). This guarantee ensures that the private sector will advance the project without causing the state to lose benefits from earlier-than-scheduled construction subsidy payments.
Anan further stated that initially, the state would pay the construction costs to the private sector upon completion. However, during negotiations, the private sector requested earlier payment. The agreement now entails the first subsidy payment in the 18th month from the date SRT issues the NTP. The management rights payments for the Airport Rail Link will still be made in seven installments, starting in 2024. The financial guarantee of approximately 128 billion baht must be provided by the private sector within 270 days after the contract signing.
Anan added that SRT will submit this matter to the Contract Management Committee and EECP for approval before amending the contract. The draft contract will be reviewed by the Office of the Attorney General and then presented to the Cabinet for consideration. All parties are expediting each step to advance this project. If the new contract is signed, SRT will promptly issue the NTP, aiming to issue it by 2024, start construction, and open for service around 2029.
Regarding Contract 4-1 construction, from Bang Sue to Don Mueang, which overlaps with the Thai-Chinese high-speed rail project's first phase (Bangkok to Nakhon Ratchasima) and the high-speed rail linking three airports project from Wat Samian Nari to Don Mueang Station (approximately 10 km), the private sector will construct the shared structure as per the original conditions. However, SRT will request an additional 4 billion baht for the tracks, which will be part of Contract 2.3, covering rail systems, electrical systems, mechanical systems, train procurement, and personnel training, conducted by the Chinese side.
SRT Board Rejects 'Missing Link' Plan, Orders Review of Station Relocation to Connect with Ramathibodi Hospital for Convenience
Source - Thai Post
Monday, May 27, 2024, 04:29
Hua Lamphong The SRT (State Railway of Thailand) board has rejected the "Missing Link" project, instructing a review of the Rajavithi station design. The plan is to relocate the station to facilitate convenient pedestrian access to Ramathibodi Hospital before resubmitting to the board in June.
Mr. Anan Phonimdaeng, Deputy Governor of the SRT, stated that the board meeting, chaired by Mr. Jiruth Wisaljitr, required a review of the budget framework adjustment for the light red line (Bang Sue-Phaya Thai-Makkasan-Hua Mak) and dark red line (Bang Sue-Hua Lamphong) projects, covering 25.9 kilometers. The proposed relocation of Rajavithi station aims to improve passenger access to Ramathibodi Hospital. The details must be reviewed and resubmitted in the June 2024 meeting.
Key details to be revisited include the station relocation rationale and the scope of work. Originally, the station was opposite Rajavithi; now, the plan is to move it closer to Ramathibodi Hospital for easier access. The board requires a clear explanation of the benefits and any impacts on the three-airport rail link project, supported by official documentation.
"At the next board meeting, we need to explain the principles and reasons for the relocation, the benefits, and any potential impacts on other projects, such as the high-speed rail link between the three airports. Initial adjustments are expected to increase the budget by over 400 million baht from the original project cost approved by the Cabinet in 2016," said Mr. Anan.
Reports indicate that land expropriation for the Bang Sue-Phaya Thai-Makkasan-Hua Mak and Bang Sue-Hua Lamphong (Missing Link) segments, budgeted at 44,157 million baht in 2016 with 61 million baht allocated for expropriation, will begin from October 2024 to September 2025. The expropriation involves approximately 78 square wah (about 312 square meters) of land across two plots and three households.
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