top of page

Upcoming Changes in Thailand's Tax Landscape for MNEs

Leo Watanabe


Draft Law for Pillar Two Global Minimum Tax Rules in Thailand expected to be implemented in 2025.

Thailand's Revenue Department together with the Cabinet is currently considering a draft law aiming to align Thailand with the OECD's Global Anti-Base Erosion (GloBE) Rules to implement a 15% minimum effective tax rate (ETR) for multinational enterprises (MNEs) with annual consolidated revenue exceeding €750 million. This measure aims to combat tax base erosion and profit shifting, particularly in the digital economy by ensuring that MNEs pay a minimum level of tax regardless of where their profits are booked.

Following a two-week public consultation of the draft law in March, the Revenue Department is expected to submit the updated version to the Cabinet for consideration. The draft law outlines three mechanisms for calculating and collecting top-up taxes from MNEs that fall below the 15% ETR threshold: Domestic Minimum Top-up Tax, Income Inclusion Rule, and Undertaxed Payments Rule. Each mechanism addresses different scenarios depending on the MNE's structure and the location of its low-taxed entities. Although companies with tax privileges under the Investment Promotion Act through BOI registrations remain unaffected, MNEs with an ETR below 15% in Thailand will be required to pay a top-up tax.

The three mechanisms for determining top-up tax allocation:

  1. Domestic Top-Up Tax: Each entity within the MNE group in Thailand pays a top-up tax proportionally, based on the ETR calculation.

  2. Income Inclusion Rules: This applies to Thai constituent entities that are parent companies; top-up tax is calculated based on ownership interest percentages in low-tax entities.

  3. Undertaxed Payment Rules: If the low-tax jurisdiction is foreign, Thai entities pay a top-up tax based on the total top-up tax incurred in foreign jurisdictions minus any amounts paid under the Income Inclusion Rules.

The Cabinet is expected to implement the regulations in 2025. As such, Constituent Entities in Thailand must submit specific notifications, GloBE Information Returns, and Top-up Tax returns electronically within 15 months of the fiscal year's end. Non-compliance will result in surcharges and significant penalties amounting to up to 200% penalty of the tax shortfall.

Source: Department of Revenue

bottom of page