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Thailand Looks to Replicate Singapore's Startup Success with Tax Incentives

Updated: Dec 22, 2023

Thai government introduces tax-free capital gains for startups to boost the nascent industry and attract investors.

The Bangkok skyline.
Credits: Reuters

Thailand is taking inspiration from Singapore's renowned startup ecosystem and has implemented a tax incentive to promote the growth of its own startup industry. Introduced in June last year, the incentive allows venture capital firms and other investors to enjoy tax-free capital gains from the sale of startup shares. To qualify for the incentive, companies must operate in Thailand within one of twelve sectors, including next-generation automotive technology, smart electronics, and biotechnology.

Singapore has a long history of producing successful startups, with its business environment often compared to that of Silicon Valley. Capital gains tax exemptions have played a significant role in attracting investment to Singapore. Investors find the advantage of tax-free gains upon exit highly appealing, as stated by Gempei Asama, senior manager at Deloitte Tohmatsu Group.

Singapore's thriving startup ecosystem is further evidenced by its top ranking in the global startup ecosystem index by StartupBlink. The city-state secured the sixth position globally, surpassing China (12th) and Japan (18th). Factors contributing to Singapore's success include low corruption, streamlined paperwork processes, and a population with a high level of English proficiency. The ease of doing business in Singapore is often compared favorably to Western countries.

However, Thailand currently lags behind in the startup ecosystem rankings, occupying the 52nd spot. The country's efforts to foster its startup industry have faced challenges, including the presence of oligopolies, a shortage of investors, and a limited pool of highly skilled talent. Nonetheless, the recent tax incentives have begun to spur investment, with Thai startups raising $530 million in the first quarter, surpassing pre-pandemic levels.

The insurance-tech startup Roojai secured $42 million in funding led by German insurance group HDI International. Additionally, Bank of Ayudhya, a subsidiary of Japan's Mitsubishi UFJ Financial Group, plans to launch a $28.7 million startup fund in September, expecting participation from approximately 50 investors. The fund aims to create a supportive ecosystem for Thai startups, including a startup support program and guest lectures from prominent entrepreneurs and managers.

While progress is being made, Thailand still faces hurdles in supporting entrepreneurs. The country's complex paperwork and bureaucratic processes present challenges for starting businesses. Unlike Singapore, there is no centralized agency for handling new companies, requiring entrepreneurs to submit forms to various authorities. Many government startup programs also involve lengthy written document submissions and authorization processes that can take years.

Thailand's startup ecosystem has much ground to cover, especially when compared to the support provided by Singaporean universities since around 2010. Deloitte reports that the National University of Singapore alone has supported 25% of domestic startups in their early stages.

  • Thailand aims to emulate Singapore's startup success by offering tax incentives for capital gains in the sale of startup shares.

  • Singapore's streamlined business environment, low corruption, and English proficiency contribute to its top-ranking startup ecosystem.

  • Thailand faces challenges such as oligopolies, investor shortages, and a limited talent pool.

  • Thai startups raised $530 million in Q1, attracting notable investments like Roojai's $42 million funding round.

  • Bank of Ayudhya plans to launch a $28.7 million startup fund to foster the Thai startup ecosystem.

  • Thailand's complex paperwork and bureaucratic processes hinder business formation, while Singaporean universities have been offering comprehensive startup support for over a decade.


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