Medical foods, food supplements and Investment promotion in Thailand

          Due to the trend of health focused and aging society, the market of medical foods and food supplements is growing at high pace. The medicals foods are specially formulated and intended for the dietary management of a disease or condition that has distinctive nutritional needs that cannot be met by normal diet alone. In addition, the medical foods must be used under the ongoing supervision of a healthcare practitioner. Unlike medical foods, food supplements are intended to provide nutritional support for people in good health not for dietary management of an existing disease/condition.
 

          According to the Announcement by Board of Investment No. 2/2014 (3 December 2014) which has effective since 1 January 2015, the BOI has set the objectives to promote investment both domestic investment and Thai oversea investment in order to enhance competitiveness. Those valuable investments tend to emphasize on research and development, innovation, value creation in agricultural, industrial, services sectors, and SMEs. The qualified BOI applicants will be granted both tax incentives (e.g. Exemption/reduction of import duties on machinery and raw materials) and non-tax incentives (e.g. Permit to bring into the Kingdom skilled workers and experts to work in investment promoted activities).
      Manufacture of medical food or food supplements are considered as Activity 1.18 in Section 1 Agriculture and agricultural products. This activity is eligible for “A2” promotion and incentive. Particularly, “A2” group refers to infrastructure activities for the country’s development, activities using advanced technology to create value added, with no or very few existing investments in Thailand. For the manufacture of medical food and food supplements, products must be registered as “medical food” and “food supplements” respectively by Food and Drug Administration or other agencies with internationally accepted standards. Moreover, the manufacture of food supplements must have an active ingredient extraction process.
               Basic incentives consist of 8 years corporate income tax exemption, exemption of import duties on machinery and exemption of import duties on raw materials used in production for export. Besides tax incentives, eligible companies are entitled to bring into the Kingdom skilled workers and experts to work in investment promoted activities, to own land, to take out or remit money abroad in foreign currency. Moreover, the Board stipulates additional incentives based on the merits of the project.

• To enhance competitiveness: the in-house R&D, outsource R&D, or joint R&D with overseas institute are considered as tax expenditure 300% of real expense, IP acquisition or licensing fees for commercializing technology developed in Thailand are considered as tax expenditure 200% of real expense, for instance. Moreover, companies are eligible for additional corporate income tax exemption 1 – 3 years. 
• Merit on decentralize: project located in 20 provinces with lowest per capita income shall receive additional incentives e.g. additional 50% corporate income tax reduction for 5 years, double deduction of utility expenses for 10 years, and additional 25% deduction of the cost of installation or construction of facilities.
• Receiving supports for registration in the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI) to develop capabilities and to grow in the sustainable manner.

          As can be seen, the Board of Investment has offered several incentives to manufacture of medical food or food supplements due to the fast growing and continue expansion of this industry. Even there is bad news regarding illegal and unproved supplementary foods during last year, the long-term trend in this industry are still positive because customers are more health focused. Therefore, for those who are interested in this industry should follow the conditions prescribed by Food and Drug Administration or other agencies with internationally accepted standards in order to maintain product quality. In addition, the entrepreneurs may bring tax and non-tax incentives from the BOI into consideration. For more information, please contact for more information from Investment promotion division 1 (Bio-based and Medical Industries), Office of the Board of Investment.