In the context of international tax reform, Thailand has aligned itself with over 140 economic zones by becoming a member of the International Cooperation Framework on Base Erosion and Profit Shifting (OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting). This framework, commonly referred to as the Inclusive Framework on BEPS, has recently endorsed a comprehensive two-pillar solution aimed at addressing tax challenges stemming from the digital economy.

The Revenue Department has now unveiled the guiding principles of this solution, marking a big step in Thailand’s commitment to global tax cooperation. However, it’s important to note that the draft is currently undergoing review, and stakeholders are encouraged to voice their concerns or provide input until mid-March 2024.

Thailand Taxation

The key components can be broken into two pillars:

Pillar 1: Profit Allocation and Tax Collection Rights

Multinational enterprises (MNEs) will be mandated to allocate profits and tax collection rights in a manner that accurately reflects the value generated in each jurisdiction. This initiative aims to ensure a more equitable distribution of tax revenues, particularly in the rapidly evolving digital sector.

Pillar 2: Minimum Corporate Income Tax

Introduces the concept of a global minimum corporate income tax rate, designed to deter profit shifting and tax avoidance strategies employed by multinational groups. Under this proposal, MNEs with revenues exceeding EUR 750 million will be required to pay income tax at an effective rate of no less than 15 percent. The legislation is slated to come into effect in 2025. Notably, Thailand plans to allocate a significant portion, ranging from 50 to 70 percent, of the additional tax collected to its National Competitiveness Enhancement Fund for Target Industries.

The Ministry of Finance will lead the efforts to enact laws and establish operational guidelines to implement these measures, which include:

In light of these developments, the Revenue Department has issued a call to action for stakeholders to contribute their feedback and suggestions on the principles of the draft law. Interested parties are encouraged to submit their comments via the comment form available on the central legal system website or the Revenue Department’s website between March 1, 2024, and March 15, 2024.

Thailands commitment to implementing the OECD/G20 two-pillar solution underscores its approach to international tax cooperation and aligns with global efforts to ensure a fair and sustainable tax system in the digital age.