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March 10, 2023
2023-0452

Thailand plans to implement global minimum tax rules under OECD BEPS 2.0 Pillar Two

  • On 7 March 2023, the Thai Cabinet approved in principle to collect a global minimum tax in Thailand to align with the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two.
  • The Thai Revenue Department is in the process of drafting the legislation, of which the first draft should be ready for consideration by 2023 with an effective date in 2025.
  • The Board of Investment of Thailand (BOI) is empowered to provide cash grants to qualifying investors, subject to the investment/spending amount that could help promote Thailand's competitiveness.
  • A number of in-scope multinational enterprises (MNEs) should begin assessing its potential impacts from the implementation of global minimum tax rules and take this timeline into account when evaluating their investment decisions.

Executive summary

Thailand announced its plans to implement the global minimum tax rules under the OECD BEPS 2.0 Pillar Two and assigned the Revenue Department to draft the associated legislation. In addition, the BOI has been assigned to consider measures to alleviate impacts from the implementation of Pillar Two on the existing tax incentive programs.

Further details of the implementation and associated regulations have yet to be announced. Companies may expect adequate notice ahead of any rules becoming effective.

Detailed discussion

On 7 March 2023, the Thai Cabinet approved in principle the implementation of the global minimum tax in Thailand and assigned the Revenue Department and BOI to proceed as outlined below.

1) The Revenue Department is to draft the associated legislation and set the guidelines to:

  • Collect top-up taxes in accordance with the OECD's Pillar Two (the Revenue Department is in the process of drafting the legislation, of which the first draft should be ready for consideration by 2023 with an effective date in 2025)
  • Allocate 50 to 70% of top-up taxes collected under Pillar Two to the Competitiveness Enhancement Fund of the BOI (details will be further discussed between the Revenue Department and the BOI)
  • Share the details of top-up taxpayers with the BOI

2) The BOI will consider providing cash grants to qualifying investors, subject to the investment/spending amount that would promote Thailand's competitiveness and long-term investment.

Implications

Even though the legislation is not yet enacted, in-scope MNEs should begin assessing its potential impacts from the implementation of global minimum tax rules and be ready for the anticipated law changes. They should also be well-prepared in terms of resources and processes to ensure proper data collection and analysis management, global minimum tax liability computation, and applicable reporting obligations.

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For additional information concerning this Alert, please contact the following:

EY Corporate Services Limited, Bangkok

Ernst & Young LLP (United States), Thai Tax Desk, New York

Ernst & Young LLP (United States), ASEAN Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

 

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