Thailand on implementing Global Minimum Tax Rules under OECD's BEPS 2.0 Pillar Two

As part of updating its tax laws to comply with the inclusive framework on Base Erosion and Profit Shifting (BEPS) developed by the Organization for Economic Co-operation and Development (OECD), Thailand announced a plan to implement Global Minimum Tax rules, targeting large multinational enterprises (MNEs) with a total consolidated group revenue above EUR 750 million.

Keywords: Mazars, Thailand, Tax, OECD's BEPS 2.0 Pillar Two, BEPS, OECD, MNEs, ETR, BOI

2 June 2023

On 7 March 2023, the Thai Cabinet approved in principle the implementation of a Global Minimum Tax under OECD's BEPS 2.0 Pillar Two, where an MNE with a total consolidated group revenue of EUR 750 million or more is required to pay a global minimum tax rate of 15% in each jurisdiction which its subsidiaries operate. Suppose the subsidiaries' effective tax rate (ETR) is below 15%. In that case, a top-up tax will be imposed in either the jurisdiction of the parent of the MNE or at the subsidiary level.

The measures include assigning the Revenue Department and the Board of Investment (BOI) to proceed as follows:

The Revenue Department

To collect top-up tax under Pillar Two.
Allocate 50% - 70% of revenue from the collection of the top-up tax to the National Competitiveness Enhancement for the Targeted Industries Fund under the National Competitiveness Enhancement for the Targeted Industries Act, B.E. 2560 (the National Competitiveness Enhancement Act).
Share with the BOI the information regarding payers of the top-up tax.

The BOI

Amend the National Competitiveness Enhancement Act to include the top-up tax collections as a source of funding for the National Competitiveness Enhancement for Targeted Industries Fund.
Propose investment promotional measures to enhance the competitiveness of Thailand by providing subsidies to qualifying investors under the National Competitiveness Enhancement Act.
Propose measures to mitigate any impact from the new tax collection in the Investment Promotion Act B.E. 2520.

Currently, the Revenue Department is in the process of drafting legislation concerning top-up tax collection, aiming to release it within 2023 and effective in 2025. Further, the BOI has also been working closely with the Revenue Department in determining the approach to the allocation of revenue from the top-up tax collection to the National Competitiveness Enhancement for Targeted Industries Fund.

In light of the new tax collection approach, the in-scope MNEs should consider assessing any impact of the global minimum tax rules and be well-prepared for the amendment of laws in Thailand.

For additional information in relation to this tax alert, don't hesitate to get in touch with the Tax Advisory Practice of Mazars in Thailand.