By Wimvipa Jirakajorn, Tax Manager – RSM Tax Advisor Thailand

 

In line with the implementation of "Pillar Two" of the OECD’s (Organisation for Economic Co-operation and Development) Base Erosion and Profit Shifting (BEPS) 2.0 project’s Global Anti-Base Erosion (GloBE) Rules, the Thai government officially published a new regulation in the Royal Gazette on December 26, 2024. Starting from January 1, 2025, Thailand will impose a 15% global minimum corporate tax on large multinational enterprises (MNEs).


This new rule targets MNEs with consolidated revenues of at least EUR 750 million in two or more of the last four fiscal years. The primary focus of this implementation is the "top-up tax," which will be levied at the globally agreed minimum rate in accordance with the Global Minimum Tax framework.
The new regulation establishes three main mechanisms for imposing top-up taxes, as outlined in the OECD Model Rules. 

  1. Domestic Top-Up Tax (DTT): Thai Constituent Entities (CEs) will be liable for top-up tax under the DTT if their effective tax rate (ETR) in Thailand is lower than 15%. The DTT is designed to be a Qualified Domestic Minimum Top-Up Tax (QDMTT) under the OECD Model Rules.
  2.  Income Inclusion Rules (IIR): A Thai Ultimate Parent Entity (UPE), Intermediate Parent Entity, or Partially Owned Parent Entity will be responsible for top-up tax under the IIR if it holds direct or indirect ownership in foreign jurisdictions with a tax rate lower than 15% (low-taxed jurisdictions).
  3. Undertaxed Payment Rules (UTPR): Thai CEs will be liable for the top-up tax under the UTPR if the top-up tax in low-taxed foreign jurisdictions has not been fully paid, either under a QDMTT or IIR in those jurisdictions.


As a result, filing obligations are imposed on CEs in Thailand, requiring them to submit the return to the Revenue Department within 15 months after the last day of the UPE's fiscal year. For the first fiscal year in which the MNE group is subject to the top-up tax under this decree, there is an extension of three months, making the filing deadline 18 months. Therefore, the first filings will be due by June 30, 2027, for MNE groups with a fiscal year ending on December 31, 2025.


For both DTT and UTPR, the top-up tax liabilities will be proportionally allocated among all Thai CEs based on their GloBE Income. Under certain conditions, the Thai CEs may agree in writing to designate one CE to assume and pay the top-up tax to the Revenue Department. In such cases, the Revenue Department must be notified within 15 months after the last day of the UPE's fiscal year. However, all Thai CEs will remain jointly liable for any outstanding top-up taxes.


For IIR, the Thai UPE, Intermediate Parent Entity, or Partially Owned Parent Entity that files the Top-Up Tax Return will be responsible for paying the top-up tax.


The implementation of Pillar Two in Thailand brings both advantages and challenges for multinational enterprises (MNEs). MNEs will face increased compliance obligations, including additional reporting requirements and the potential for higher tax liabilities, particularly for those with operations in low-tax jurisdictions or benefiting from tax incentives. This could lead to added administrative costs and complexity, especially for smaller enterprises, as they navigate the new regulations.


However, it ensures alignment with global tax standards, helps prevent tax base erosion, and supports fairer taxation, benefiting Thailand’s revenue system. The goal of Pillar Two in Thailand is to ensure that large multinational enterprises (MNEs) pay a minimum level of tax on their profits, regardless of where they are located, by implementing a 15% global minimum tax rate. This aims to prevent profit shifting to low-tax jurisdictions, protect Thailand's tax base, and promote fairer competition, by aligning with international tax standards. This would benefit Thailand for seeking to strengthen its fiscal system, attracting responsible investment, and reducing opportunities for tax avoidance, ensuring that MNEs contribute their fair share to the economy.

 

For more information with respect to Thailand tax issues or Thailand accounting issues please do not hesitate to contact RSM Thailand Tax Consultants on [email protected]. Our RSM Thailand taxation advisors have a wealth of experience and are eminently qualified to assist foreign entities wishing to conduct business in the Kingdom.

 

Source: https://ratchakitcha.soc.go.th/documents/55519.pdf
https://www.thaigov.go.th/news/contents/details/91823
https://thestandard.co/minimum-tax-international-companies/
https://www.law.tu.ac.th/tulawinfographic83/
https://www.bangkokpost.com/business/general/2928401/thailand-to-impose-minimum-15-corporate-tax-from-jan-1
https://www.nationthailand.com/news/policy/40044545