The Digital Council of Thailand (DCT) is urging the government to waive capital gains tax for investment in startups to attract investors to fund them.
The move is also aimed at turning Thailand into an innovation hub by 2025 as 20% of total investments in Asean tech companies go to Thailand.
"The waiver of capital gains tax for investment in startups is a key step to attract investments and enable Thailand to become an innovation hub and bring foreign investment for startups," said DCT chairman Atip Asvanund said.
He was speaking at a virtual seminar yesterday held by the DCT on tax incentives for tech companies.
Some foreign venture capitals (VCs) set conditions for Thai startups to register in Singapore so they can be eligible for capital gains tax exemption, he said. This causes Thailand to lose corporate income tax and the opportunity to create jobs in tech, Mr Atip said.
"Tech is a new S-curve industry for Thailand's economy," Mr Atip said.
Akkaraj Boonyasiri, a tax economist at the Revenue Department, said capital gains tax exemption was implemented for VCs who registered with the Securities and Exchange Commission as a temporary measure from 2016-2018.
"We now need to evaluate the overall startup ecosystem to determine how the country would benefit from capital gains tax exemption, particularly the prospect of new investments," he said.
Sarun Sutuntivorakoon, president of the Thai Venture Capital Association, said waiving capital gains tax is necessary and serves as a key starting point to attract investors -- the same way Singapore does. However, tax is not the only issue to be dealt with for local startups to grow and become attractive.
"Thailand's market size and startups' ability to acquire talent are also important to allow them to grow in quantity and quality," said Mr Sarun.
Nichapat Ark, adviser for Thailand coverage at Openspace Venture, said waiving capital gains tax would draw foreign VCs to invest, however, this is only one factor of consideration.
She said she is aware that many foreign VCs want local startups to register in Singapore to enjoy tax incentives and less legal complication.
Nawat Kamnoonwat, project owner of DCT's Innovation Hub, said in the first half of 2020, Thailand had a 5% share in capital investment in tech firms in Asean, trailing Indonesia with 74% and Singapore with 12%.
