Thailand sets out three-tier EV excise tax based on local investment

Lavaron Sangsnit, permanent secretary for finance, said the Finance Ministry and Excise Department had the authority to draw up excise tax rates for electric vehicles (EVs), hybrid vehicles, plug-in hybrid vehicles and other vehicle types.

He expected the proposal to be submitted to the Cabinet for approval by the end of September.

“We are not yet able to disclose the proposed adjustment to EV excise tax rates because it requires Cabinet approval. The Finance Ministry and Excise Department are responsible only for preparing the information. We believe it would be best to submit the proposal to the Cabinet as soon as possible.”

EV tax overhaul proposed to retain automotive production hub

Pornchai Thiraveja, director-general of the Excise Department, said after a meeting of the National Electric Vehicle Policy Committee, or EV Board, that the electric vehicle industry accounted for about 2% of the country’s gross domestic product (GDP) and about 15% of total export value.

However, monitoring data showed that imports accounted for a very high proportion of some types of EV sold in Thailand, affecting the domestic production base and posing a significant risk to it.

To preserve Thailand’s position as a regional automotive manufacturing hub in line with government policy, the Excise Department proposed restructuring the excise tax around three main objectives.

These were to apply investment conditions to vehicle imports to reduce imports solely for sale, promote Thailand as an export base for right-hand-drive EVs and increase the use of local content, or domestically produced automotive parts.

“The measure will be driven solely by the excise tax mechanism and will not use budget subsidies, unlike the previous EV3.0 and EV3.5 measures. The tax structure will have three rates, or three tiers.”

EV tax formula divided into three tiers

The Excise Department has designed the three-tier structure according to the level of investment promotion and the proportion of locally produced parts, as follows.

• Tier 1, carrying the lowest tax rate, would apply to operators that manufacture vehicles in Thailand and use a high proportion of local content.
• Tier 2 would carry a moderate tax rate and apply to operators importing vehicles to test the market or begin establishing a market presence, supported by plans to invest in domestic production.
• Tier 3, carrying the highest tax rate, would apply to operators that import vehicles solely for sale without plans to invest or establish a manufacturing base in Thailand.

Tier 3 to come first as tax is expected to exceed 10%

“In practice, the Excise Department is preparing to impose the highest tax rate, Tier 3, first during the initial phase to slow the influx of imported vehicles that do not generate actual investment in Thailand. The three-tier tax mechanism has already received approval in principle from three automotive associations and the private-sector operators attending the meeting.”

The meeting had not yet discussed details of the grace period before implementation or the exact tax rate for each tier.

The Finance Ministry and Excise Department have the authority to determine the rates before submitting them to the Cabinet.

At present, the standard import tax rate is 10%, while vehicles receiving investment promotion or manufactured domestically are eligible for lower rates of between 2% and 8%.

The new rate for the highest tier is expected to exceed the existing 10% level.

“The Excise Department will expedite talks with the Finance Ministry and private sector to finalise the figures and submit them directly to the Cabinet for approval, without needing to return the proposal to the EV Board.”

Two subcommittees appointed for comprehensive oversight

Narit Therdsteerasukdi, secretary-general of the Thailand Board of Investment (BOI), in his capacity as secretary to the EV Board, said the meeting had also resolved to appoint two subcommittees.

The Electric Vehicle Manufacturing Promotion Subcommittee, chaired by the industry minister, will oversee the supply chain, standard-setting and comprehensive management of used batteries.

A central platform will track battery production, use, disposal and recycling from beginning to end.

The Electric Vehicle Charging Station Network Development Subcommittee, chaired by the energy minister, will accelerate the expansion of chargers nationwide.

Finance permanent secretary tasked with truck EV transition

The EV Board also assigned the permanent secretary for finance to study measures to promote electric commercial vehicles, including buses and trucks, as well as electric motorcycles, to encourage the transition across all vehicle categories.

Discussions will also be held with the private sector on a grace period for adapting to the new tax system, with the aim of ensuring that the Thai automotive industry’s transition proceeds smoothly and as efficiently as possible.

The meeting also assessed the results of the EV3.0 and EV3.5 promotion measures over the past five years, describing them as highly successful.

EVs of all types had risen to more than 50% of total new vehicle registrations, while the measures had continued to attract investment from leading carmakers.

At the beginning of this year, four major carmakers announced investment plans worth more than THB50 billion in total, reflecting confidence in Thailand as a regional automotive manufacturing hub.