Manufacturing in Southeast Asia: What Thailand and Vietnam Actually Offer Foreign Founders

A practical look at the incentive programs in Thailand and Vietnam, what foreign founders need to do to incorporate in each country, and where the programs are genuinely useful and where they fall short.

Southeast Asia has become one of the more actively discussed manufacturing destinations for founders and investors who are looking to diversify production away from China or to establish a lower-cost base for export-oriented manufacturing. Thailand and Vietnam are the two countries that appear most frequently in those conversations and for good reason: both have significant industrial infrastructure, active government incentive programs, improving logistics networks and labour costs that remain well below those of Northeast Asian manufacturing centres.

What the broad conversation tends to gloss over is the detail of how these programs actually work for a foreign founder, what the incorporation requirements are, whether a local partner is genuinely required or whether that can be avoided, and what the real limitations of the incentive frameworks are for a company that is not yet large. This article tries to address those questions with specifics.

Thailand: The BOI System and What It Means in Practice

The Foreign Business Act and Why the BOI Matters

Thailand has a law called the Foreign Business Act which restricts foreign companies from owning more than 49 percent of a Thai company in a wide range of business activities unless specific exemptions apply. For a foreign founder this is a significant constraint because 49 percent ownership means a Thai partner holds the majority stake and therefore has ultimate legal control of the entity, which creates risk in any dispute regardless of what a shareholder agreement says.

The Board of Investment, known universally as the BOI, is the mechanism through which that restriction can be removed for qualifying businesses. BOI-promoted companies receive 100 percent foreign ownership without Thai partner requirements and eligible sectors include advanced manufacturing, automation, robotics, electric vehicles and advanced materials. This means that for a manufacturing startup working in any of these categories the local partner requirement that applies to most foreign businesses in Thailand simply does not apply, provided BOI approval is obtained before or around the time of incorporation.

The BOI is therefore not just an incentive program in the tax sense but the gateway to a viable ownership structure for a foreign-founded manufacturing business in Thailand. Without it, a foreign founder is either accepting a minority ownership position or working around the Foreign Business Act through shareholder agreements that give operational control without legal majority ownership, which is a legally uncertain approach that many advisers in Thailand caution against.

What the BOI Actually Provides

A company granted BOI approval may be permitted to operate in Thailand with 100 percent foreign ownership regardless of restrictions under the Foreign Business Act and BOI-promoted companies may benefit from up to 8 years of corporate income tax exemption with possible extensions to 11 years depending on the sector. Beyond the tax exemption the BOI also provides import duty exemptions on qualifying machinery and raw materials, streamlined visa and work permit processes for foreign experts, the right to own land for business purposes (which foreigners cannot normally do in Thailand) and in some cases exemptions from the standard foreign-to-local employee ratio requirements.

The corporate income tax rate in Thailand is 20 percent on a standard basis and the exemption period granted by the BOI represents a meaningful cash flow benefit for a capital-intensive manufacturing startup in the years when profit margins are typically thin and every baht of tax paid reduces the capital available for reinvestment. For an advanced manufacturing project classified at the higher activity levels (A1 or A2 in BOI terminology), the full 8-year exemption applies and for certain EV and high-technology manufacturing projects this can extend further.

For the manufacture of battery electric vehicles, plug-in hybrids and hybrid electric vehicles, ventures enjoy up to 8 years of corporate income tax exemption with no cap on exempted profits for A1-level activities and these projects also benefit from import duty exemptions on machinery and essential raw materials.

For smaller companies the minimum investment threshold for BOI promotion is generally 1 million Thai baht (approximately AUD 44,000 and USD 28,000) for technology-oriented projects, rising to 10 million Thai baht (approximately AUD 440,000 and USD 280,000) or more for larger manufacturing operations. The minimum capital requirement for company registration itself, for any foreign-involved business, is 2 million Thai baht (approximately AUD 88,000 and USD 56,000) of registered capital with at least 25 percent paid up at incorporation.

Workforce Requirements Introduced in 2025

A change that came into effect in October 2025 matters for founders planning a manufacturing operation of any scale. For BOI-promoted companies in the manufacturing sector, companies with more than 100 employees will need to ensure that at least 70 percent of their workforce consists of Thai nationals. Exemptions are available for companies that can demonstrate they are using advanced technology not yet available from local labour and that a technology transfer plan is in place, but this exemption requires a formal application and is not automatic.

For a startup with fewer than 100 employees the ratio requirement does not apply, which covers most early-stage manufacturing operations, but founders planning to scale to medium or large production volumes should build the Thai staffing requirement into their workforce planning from the outset rather than treating it as a future problem to solve.

Foreign expert positions in BOI companies now require minimum monthly salaries ranging from 35,000 Thai baht (approximately AUD 1,540 and USD 980) for specialist roles to 150,000 Thai baht (approximately AUD 6,600 and USD 4,200) for senior executive positions, which affects the cost modelling for bringing international technical staff into a Thai manufacturing operation.

How to Incorporate in Thailand as a Foreign Founder

The process for establishing a manufacturing company in Thailand with BOI promotion involves two sequential tracks that overlap. The BOI application is submitted first, or concurrently with company incorporation, and the company must be a fully incorporated Thai entity with verified capital to receive final BOI approval. A preliminary application can be submitted before incorporation but final approval requires the incorporated entity to exist.

Company registration in Thailand takes 5 to 6 weeks from name reservation through to final registration and adding business visa processing extends the timeline to 8 to 12 weeks in total while BOI applications add a further 2 to 3 months. A founder who starts both tracks simultaneously should plan for an overall timeline of 3 to 5 months from beginning the process to having an operational BOI-approved company with work permits in place.

The practical steps are to reserve a company name through the Department of Business Development, prepare the memorandum of association and articles, deposit the paid-up capital (minimum 25 percent of registered capital) into a Thai bank account, register the entity, apply for VAT registration if annual revenue will exceed 1.8 million Thai baht (approximately AUD 79,000 and USD 50,000), and simultaneously prepare and submit the BOI application with a detailed business plan, financial projections, staffing plan and description of the manufacturing process and its contribution to the Thai economy.

The BOI application typically spans approximately 8 to 10 pages and must be accompanied by supporting documentation and following submission the applicant must attend an in-person interview at the BOI headquarters in Bangkok where founders or designated representatives are expected to present their business proposal and respond to questions about its feasibility.

A physically registered office address, not a virtual office, is required for manufacturing businesses and the BOI imposes compliance reporting requirements on promoted companies including regular confirmation of investment activity, employment numbers and technology transfer progress. The compliance burden is real and ongoing rather than a one-time application exercise.

Where to apply: The BOI's online application portal is at investment.boi.go.th and the BOI's main website at boi.go.th contains sector-specific guidance on which activity categories attract which level of incentives. Engaging a Thai law firm or BOI specialist before beginning the application process is standard practice and is genuinely useful given the specificity of the documentation requirements.

The Pros and Cons of Thailand's Program for a Manufacturing Startup

The BOI system is well established, reasonably transparent, and documented in English to a standard that makes it navigable without a Thai language speaker on the founding team. The 100 percent foreign ownership provision removes the most significant structural risk that foreign founders face in most Southeast Asian markets and the combination of tax exemption and import duty relief on machinery provides real financial benefit in the capital-intensive early years of a manufacturing operation.

The limitations are also real. The BOI application process is detailed and takes time, the in-person interview requirement means at least one visit to Bangkok during the process, the compliance obligations are ongoing, and the 2025 workforce changes have added requirements that affect cost modelling for scaling operations. The manufacturing sector in Thailand is also increasingly competitive as a large number of companies that previously manufactured in China have relocated operations there, which affects land costs, industrial estate availability and labour market conditions in the zones most attractive to BOI applicants.

Vietnam: Tax Incentives, Industrial Parks and the Complexity of the CIT Framework

Ownership and the Local Partner Question

Vietnam's position on foreign ownership in manufacturing is more straightforward than Thailand's for most business types. Many sectors are 100 percent open to local and foreign investors, including most IT services, management consulting, software development and manufacturing for export and this is a key driver of Vietnam's foreign direct investment attraction. For a manufacturing startup oriented toward export production, which covers a significant portion of the businesses that would be considering Vietnam as a manufacturing base, a local Vietnamese partner is generally not required.

A few industries restrict foreign ownership including tourism, logistics and advertising and in such cases foreign investors must have a Vietnamese joint venture partner but for most business lines in Vietnam foreign ownership is regulated by the World Trade Organisation agreements. The practical implication is that a hardware or electronics manufacturing startup, a drone manufacturer, a medical device company or a company producing components for export can generally establish a fully foreign-owned entity without requiring a Vietnamese partner.

The requirement that does apply universally is that all companies in Vietnam must have at least one legal representative with a residential address in Vietnam, meaning either a founder relocates to Vietnam or a locally-based director is appointed as the legal representative. This is a different constraint from a local partner requirement because the legal representative does not need to hold equity in the company.

The Incorporation Process

Foreign investors must first obtain an Investment Registration Certificate (IRC), followed by an Enterprise Registration Certificate (ERC) and each certificate serves a distinct purpose: the IRC recognises the offshore investment project while the ERC creates the legal existence of the company. Additional licences apply in some sectors, particularly for regulated manufacturing activities, but for most general manufacturing operations the IRC and ERC are the primary documents required.

For incorporating a 100 percent foreign-owned company in Vietnam, the process typically spans 40 to 60 working days excluding public holidays from the time the necessary documents are submitted and there is no official minimum capital requirement, though a minimum capital of USD 20,000 (approximately AUD 31,000) is commonly recommended during the incorporation process.

The faster timeline that applies to locally-owned companies (typically 7 working days) does not apply to foreign-owned entities because the IRC process involves the Ministry of Planning and Investment rather than just the local Department of Planning and Investment. This difference in processing time is one of the practical realities of the regulatory framework that affects how quickly a foreign-owned manufacturing operation can begin generating revenue.

A physically registered address is required for manufacturing operations and a virtual office address is not sufficient, which means finding and leasing a production or storage facility is a prerequisite of the incorporation process rather than something that can follow it. The cost of industrial space in Vietnam's major manufacturing zones such as Binh Duong, Dong Nai and the northern provinces near Hanoi has risen substantially as demand has increased with China-plus-one supply chain diversification, but remains well below comparable industrial space in Thailand's Eastern Economic Corridor.

The Tax Incentive Framework and the 2025 Changes

Vietnam's corporate income tax incentive framework has undergone significant changes with new legislation taking effect from October 2025 and the pattern of how incentives are granted has shifted in ways that matter for a foreign founder planning a manufacturing operation.

The standard corporate income tax rate in Vietnam is 20 percent. The preferential rate for qualifying manufacturing projects in high-technology sectors and designated economic zones is 10 percent for a period of 15 years and this is accompanied by a tax holiday of 4 years from the first year in which the company generates taxable income followed by a 50 percent tax reduction for the subsequent 9 years. In practice this means a qualifying high-technology manufacturing company pays no corporate income tax for its first 4 profitable years and then pays 5 percent (half of 10 percent) for the following 9 years before reverting to the preferential 10 percent rate for the remainder of the 15-year period and then transitioning to the standard rate.

Unlike prior regimes, the 2025 amendment to the corporate income tax law abolishes tax incentives for investments in standard industrial parks and broadly defined disadvantaged areas and incentives now apply only to projects located in areas with especially difficult socio-economic conditions or in special economic zones, high-tech parks and centralized IT zones designated by the Prime Minister. This change is significant because it means a company manufacturing in a standard industrial park, which was previously a qualifying location for CIT incentives, no longer qualifies under the new rules for new investment licenses issued after October 2025.

The practical consequence is that foreign founders planning a manufacturing operation in Vietnam need to assess whether their planned location and sector qualify under the new sector and location-based criteria rather than assuming that being in an industrial park is sufficient. The three designated high-technology parks at Saigon Hi-Tech Park in Ho Chi Minh City, Hoa Lac Hi-Tech Park near Hanoi and Da Nang Hi-Tech Park remain qualifying locations and continue to provide access to the preferential tax treatment alongside import duty exemptions on qualifying machinery and equipment.

Import duty exemptions are available for goods imported to form fixed assets of qualifying projects and for raw materials that cannot be produced domestically and are used directly in the manufacturing process, as well as for goods used for scientific research and technology development. These exemptions provide a meaningful cost reduction for a manufacturing startup that is bringing in specialised machinery or components from overseas during the establishment phase.

The National Innovation Center

Vietnam's National Innovation Center established under Decree 97 in May 2025 provides incubation and business support including workspace, technical infrastructure and mentoring for startups and research and development-driven firms along with consulting, networking and investor matchmaking services and foreigners working at NIC units in managerial, executive, expert and technical positions that Vietnamese workers cannot fill are not required to obtain a work permit.

The NIC is located at Hoa Lac Hi-Tech Park near Hanoi and the work permit exemption for qualifying foreign staff is a practical benefit for a startup that is bringing in technical specialists who would otherwise need to go through Vietnam's standard work permit process. Access to the NIC is available to both domestic and foreign-founded companies and the facility provides shared laboratory infrastructure that can be useful for hardware and electronics manufacturing startups in the prototyping and early production stages.

Where to apply: The Ministry of Planning and Investment at mpi.gov.vn handles the IRC application process and provides published guidance on investment procedures in English. The National Innovation Center's website at nic.vn describes access conditions and the support services available. The three designated high-technology parks each have their own management boards that handle applications for location within the parks and can advise on qualifying for the associated incentives.

The Pros and Cons of Vietnam's Program for a Manufacturing Startup

Vietnam's corporate income tax incentive is more generous in financial terms than Thailand's BOI exemption for qualifying projects, offering a longer preferential period and a lower ongoing rate of 10 percent once the exemption period concludes. The 100 percent foreign ownership option in manufacturing removes the structural complexity that Thailand's Foreign Business Act creates for non-BOI-approved companies and the absence of an official minimum capital requirement provides more flexibility in structuring the initial capital contribution.

The limitations are also clear. The regulatory framework is more complex and less well documented in English than Thailand's BOI system, the processing time for incorporation (40 to 60 working days) is longer than Thailand's standard timeline, and the 2025 changes to the CIT law mean that the qualifying conditions for tax incentives are narrower than they were under the previous industrial park-based regime. Vietnam's regulatory environment changes more frequently than Thailand's which means advice that was accurate two years ago may no longer reflect current requirements, and engaging local legal and tax advisers who are current on the post-2025 framework is essential rather than optional.

The country is also navigating a significant increase in manufacturing investment from companies relocating production from China and the practical challenges of finding suitable industrial space, sourcing qualified local managers and working through government processes are compounded by that increased demand. Vietnam attracted approximately USD 28.54 billion (approximately AUD 44 billion) in foreign direct investment in the first nine months of 2025, the highest inflow in at least five years, which reflects both the scale of the opportunity and the intensity of competition for the resources and relationships that a new manufacturing entrant needs.

Comparing the Two Programs

For a founder deciding between the two countries, the key variables are not primarily the headline incentive rates but the nature of the manufacturing activity, the scale of initial investment, the importance of ownership structure clarity, and the founder's capacity to manage regulatory complexity at an early stage.

Thailand's BOI system is more predictable and better documented and the ownership question is cleaner for BOI-approved projects, but the application timeline is longer and the 2025 workforce requirements add planning complexity for operations that intend to scale. Vietnam's incentives are more generous for qualifying projects but the regulatory framework is more complex, the qualifying conditions have narrowed under the 2025 CIT law and the processing timeline for foreign-owned entities is longer than for locally-owned ones.

A manufacturing startup in advanced electronics, drone components or precision engineering that is export-oriented and intends to locate in a designated high-technology park will find Vietnam's framework provides meaningful financial benefit over a 15-year horizon. A startup that values regulatory clarity, established infrastructure and the ability to bring in international staff with minimal friction will find Thailand's BOI system easier to work with in the early stages, particularly if the business falls clearly within one of the BOI's promoted activity categories.

Neither program is a straightforward route to establishing a manufacturing operation and both reward founders who engage local specialist advisers early in the process rather than treating the application as a paperwork exercise that can follow the strategic and operational decisions. The time spent understanding the specific conditions that apply to a particular type of manufacturing activity before committing to a location is time that consistently proves well spent.