Thailand to offer tax break on revenue from carbon credit trades

Thailand will exempt revenue from carbon credit trades from corporate taxes to encourage manufacturers to invest in emission reduction projects under the UN's clean development mechanism (CDM) scheme.

The government's Board of Investment approved the exemption yesterday, which removes a requirement for developers of CDM projects to pay the 30 per cent standard rate of corporate income tax.

The incentive puts Thailand on a par with other Southeast Asian countries, which offer similar incentives for investments in CDM projects. For example, Malaysia last year launched a two-year tax break for CDM developments.

The government's move is aimed at boosting the number of registered CDM projects in the developing country which, at just 91 projects, lags behind many of its neighbours. China, for example, has 663 CDM registered projects and is continuing to see the sector expand rapidly.

According to the Thailand Greenhouse Gas Management Organization, which grants approval for domestic CDM developments, the country is the fourth-ranking Southeast Asian nation in terms of registered CDM projects after Malaysia, the Philippines and Indonesia.

The wider Asia-Pacific region is home to 70 per cent of CDM projects, although they are heavily concentrated in China and India, which account for about 60 per cent of all projects globally.

The Thai government's move follows advice from the Thailand Development Research Institute think-tank, which earlier this year released a study concluding that more companies would be enticed to invest in CDM projects if tax breaks were given for carbon credits.

The institute anticipated a rise in future demand – and therefore prices – for CO2 credits with the EU identified as potentially Thailand's largest market.