RDC - Research and Development Certification Committee
In a highly competitive domestic and international environment, research and development (R&D) activities are regarded as one of the crucial factors strengthening the efficiency of industrial competitiveness and leading to sustainable competitive advantages. Over the years, Thailand has gradually lost its competitive advantage, particularly labour advantages, and is becoming more expensive than its neighbouring countries. Limited and dwindling natural resources also put Thailand in a less position. Industrial restructuring, especially changing from a labour-based economy to a knowledge-based economy, is necessary to regain Thailand’s competitive advantage. In a knowledge-based economy, it is technological R&D that is the main driving force of national development. As a result, the enhancement of R&D is desirable in all countries.
Thailand’s government has recognized the importance of R&D and promoted it through various measures. One such measure is the encouragement of private sector investment in R&D. The Ministry of Finance enacted a Royal Decree, issued under the revenue code governing exemption from income taxes (No. 297) B.E. 2539, on July 15, 1996. This decree provides an incentive for private sector companies, including partnerships, to undertake R&D activities by providing tax exemption at an amount equal to 100 percent of the expenses incurred. In other words, R&D expenses may be deducted twice.
In practice, most private sector companies conducting R&D have hesitated to request this tax benefits since the interpretation of whether a project was eligible for such exemption remains uncertain. Accordingly, on February 3, 1998, the Cabinet authorized the Ministry of Science Technology and Environment (MOSTE) to assist the Revenue Department in certifying R&D organizations and verifying R&D projects. To encourage the use of R&D tax incentives, MOSTE and the Revenue Department jointly established a Committee on Private Sector R&D Expense Certification. This committee would set out the policy and approach to be taken pursuant to the Order of Revenue Department No. 584/2545 on December 30, 1999. The conclusion of the committee was that the National Science and Technology Development Agency (NSTDA) should be in charge of the verification and approval of R&D projects, which conclusion was officially endorsed by the Notification of the Revenue Department No. 103/2544 on February 5, 2001. To accomplish the efficiency and transparency of the certification process, NSTDA issued Order No. 072/2544 to set up the Research and Development Certification Committee (RDC) and the Office of RDC Secretariat on February 28, 2001. The main responsibilities of RDC are to verify and certify R&D projects for tax incentive purpose and to provide, as requested by the Revenue Department, technical opinions related to the interpretation of R&D activities. In addition, the Office of RDC Secretariat has a duty to facilitate the operation of RDC. This mechanism is designed to stimulate and enhance the private sector to seek tax benefits in order to improve Thailand’s international competitiveness.
From October 2001 to May 2002, RDC certified 17 projects valued at over Baht 26 million. At present, there are 68 projects in process – valued at approximately Baht 595 million. All R&D project applications may be classified as follows:
