Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 12, 2024
2024-0381

Thailand announces additional criteria for battery powered electric vehicles produced in Free Zones

  • Additional production process criteria have been announced to attract investment from new and existing automobile companies to develop battery electric vehicle production in Thailand, where such production is undertaken within Thai Customs approved Free Zone or designated Industrial Estate Authority of Thailand Free Zone areas.
  • Battery localization criteria has been revised to add the option of battery pack assembly from cells.
 

In keeping with the Thai Government's ongoing push to develop the battery electric vehicle (BEV) manufacturing sector in Thailand, the Office of Industrial Economics (OIE) has announced additional Essential Production Process (EPP) criteria aimed at facilitating the gradual transition of the existing vehicle manufacturers in the Customs Free Zone (CFZ) or an Industrial Estate Authority of Thailand-Free Zone (IEAT-FZ) for the domestic market.

Under the Notification of the Ministry of Finance (MOF) dated 28 December 2021 in relation to duty reduction and exemption under Section 12 of the Customs Tariff Decree 1987, goods produced within a Free Zone using imported raw materials and parts that are subsequently sold or consumed domestically are eligible for duty reduction or exemption, provided the following two tests are met:

  1. Local content threshold: Goods produced must meet a minimum 40% local/ASEAN content threshold.
  2. Process test: The production process undertaken in the CFZ or IEAT-FZ to produce the goods must meet the prescribed EPP criteria, as determined by the OIE.

Under the latest OIE's Notification regarding the EPP criteria for vehicle manufacturers, the EPP criteria for batteries (under Category #30) have been revised. Moreover, two new EPP criteria (under Category #35 and #36) have been introduced. Details of the revised/new EPP criteria are summarized below for your reference. They came into effect as of 28 December 2023.

Category #30 for batteries (revised)

EPP criteria (original)EPP criteria (revised)
  • Before 1 January 2025
  • Battery Pack Assembly
  • Quality Check
  • After 1 January 2025
  • Module Production
  • Battery Pack Assembly
  • Quality Check
  • Before 1 January 2025
  • Battery Pack Assembly
  • Quality Check
  • After 1 January 2025

Option 1

  • Module Production
  • Battery Pack Assembly
  • Quality Check

Option 2

  • Battery Pack assembled from Cell
  • Quality Check
  • Module production involves assembling battery cells by connecting them with cut-outs and a management system.
  • Battery pack assembly is the complete assembly of battery modules, along with other component parts, for further integration into a vehicle.
  • Quality check involves assessing the usability features and safety of the battery packs.
  • Module production involves assembling battery cells by connecting them with cut-outs and a management system.
  • Battery pack assembly is the complete assembly of battery modules, along with other component parts, for further integration into a vehicle.
  • Quality check involves assessing the usability features and safety of the battery packs.
  • Battery pack assembled from cell involves assembling battery cells by connecting them with cut-outs and other component parts to create a complete battery pack that can be further integrated into a vehicle.

For BEV companies in the CFZ or IEAT-FZ that have signed up for the BEV 3.0 incentive program and have utilized the existing concessional local content calculation treatment on imported battery cells, local battery production must meet either Option 1 or 2 starting from 28 December 2023.

Category #35 for ICEs,i HEVs,ii PHEVsiii and BEVs (New)

Production volume EPP criteria

If ≤ 4,500 units/year

  • For ICEs and HEVs
    • Body Production
    • Body Painting
    • Assembly
    • Quality Check

and/or

  • For PHEVs and BEVs
    • Battery Production
    • Assembly
    • Quality Check

If > 4,500 units/year

  • For 1 - 4,500 units, the EPP criteria are as follows:
    • For PHEVs/BEVs — Battery production of at least 2,250 units/year
    • Body Production and Painting for ICEs/HEVs/PHEVs/ BEVs
    • Assembly
    • Quality Check

Only the EPPs outlined in Items 1.1 and 1.2 should be considered collectively. For example, if there are EPPs as outlined in Item 1.1, there should also be EPPs as outlined in Item 1.2 for the remaining units. This ensures the total quantity is at least 4,500 units per annum.

2)    For 4,501 units and beyond, the EPP criteria are as follows:-

2.1)   Assembly

2.2)   Quality Check

  • Within the first year of production, manufacturers must produce BEV passenger cars. Starting from the second year, the production of BEV passenger cars must not be fewer than 500 units per annum. The production of BEV passenger cars must undergo essential production processes, especially assembly and quality checks.

Remarks:

  • Body production involves the assembly of a body using unpainted body parts through methods such as welding.
  • Body painting involves coloring the assembled body to prevent rusting or for decorative purposes, using methods such as electroplating and spraying.
  • Assembly involves the process of assembling automotive parts onto the painted body, including the installation of the power unit (e.g., engine), power train system, and wiring harness.
  • Quality check refers to the final inspection of the vehicle's quality, which includes examining the safety devices and engine system.
  • Battery production must undergo the essential production processes as outlined in Category 30 of the OIE's Notification.

i ICE: Internal Combustion Engines

ii HEV: Hybrid Electric Vehicles

iii PHEV: Plug-in Hybrid Electric Vehicles

Category #36 for BEVs produced from Vehicle Structure specifically designed for BEVs (New)

Production volume EPP criteria

If ≤ 10,000 units over a 5-year period

  • Vehicle Structure Production
  • Body Painting
  • Assembly
  • Battery Pack Assembly (at a minimum)
  • Quality Check

If > 10,000 units over a 5-year period

For 1 — 10,000 units

  • Vehicle Structure Production
  • Body Painting
  • Assembly
  • Battery Pack Assembly (at a minimum)
  • Quality Check

The EPPs must be conducted every year from Year 1 to Year 5 of production.

For 10,001 units and beyond

  • Assembly
  • Quality Check

Remarks:

  • Vehicle structure production involves the manufacturing of an unpainted main vehicle structure through welding or fixing, excluding the attachment of additional automotive parts such as bumpers and headlights, which are subsequently assembled onto the body.
  • The vehicle structure designed specifically for BEVs must differ significantly from the structure of other vehicle types. It can only be manufactured for BEVs and cannot be produced for other types of vehicles.
  • Body painting involves coloring the assembled body to prevent rusting or for decorative purposes, using methods such as electroplating and spraying.
  • Assembly involves the process of assembling automotive parts onto the painted body, including the installation of the power unit, power train system and wiring harness.
  • Battery pack assembly is the complete assembly of the battery modules, along with other component parts, for further integration into a vehicle.
  • Quality Check refers to the final inspection of the vehicle's quality, which includes examining the safety devices and engine system.

The purpose of this Tax Alert is to facilitate understanding of the proposals and it should not be used exclusively for tax planning without prior consultation with experts.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

EY Corporate Services Limited, Thailand

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct