Thailand Implements Top-Up Tax for Multinational Enterprises Starting 2025

Multinational enterprises face new tax obligations in Thailand, with the introduction of a 15% minimum effective tax rate under the OECD’s global tax reform framework starting January 2025.

Thailand introduces a top-up tax under the OECD framework, effective January 2025, ensuring multinational enterprises with annual turnover over EUR 750 million meet a 15% tax rate. Discover its impact on BOI incentives and compliance.

Thailand Enacts the Top-Up Tax 

Thailand has officially joined the global movement for corporate tax reform with the enactment of the Emergency Decree on Top-Up Tax B.E. 2567 (2024), which took effect on January 1, 2025. This legislation aligns with the OECD’s Global Anti-Base Erosion (GloBE) Rules under its BEPS 2.0 framework. Its primary aim is to ensure that multinational enterprises (MNEs) pay a minimum effective tax rate of 15%.  

OECD’s Role in Global Tax Reform 

The OECD has been a key driver of global corporate tax reform, primarily through its Base Erosion and Profit Shifting (BEPS) 2.0 project. A central component of this initiative is the introduction of the GloBE Rules, which aim to curb tax avoidance by setting a global minimum tax rate. This ensures that MNEs are taxed where their economic activities occur, thereby reducing the incentive to shift profits to low-tax jurisdictions. 

Who Is Subject to the New Tax? 

The Emergency Decree applies to MNE groups with a consolidated annual turnover of at least EUR 750 million (approximately THB 28 billion) for at least two of the preceding four fiscal years. It also covers constituent entities operating in Thailand whose effective tax rate is below the 15% threshold. The effective tax rate under the OECD framework is calculated separately for each jurisdiction. For Thailand, this involves summing up all covered taxes paid by in-scope Thai entities and comparing the total to their net GloBE income. If the resulting ETR is below 15%, the MNE must pay a top-up tax to the Thai Revenue Department to meet the required minimum. 

How Is the Effective Tax Rate Calculated? 

The Emergency Decree introduces three mechanisms for the collection of the top-up tax. The Domestic Top-Up Tax applies when the effective tax rate in Thailand for a particular MNE group falls below 15%, requiring the Thai entities in that group to pay the difference. The Income Inclusion Rule (IIR) ensures that Thai parent entities or intermediate parents pay top-up tax on foreign low-taxed income, while the Undertaxed Payment Rule (UTPR) allocates any unpaid top-up tax to Thai entities if the top-up obligations are not fully covered in other jurisdictions. These mechanisms are consistent with the OECD’s Model Rules and are designed to ensure comprehensive compliance with the global minimum tax regime. 

Mechanisms to Ensure Compliance 

MNEs subject to the Emergency Decree are required to fulfill a series of filing obligations. This includes notifying the Thai Revenue Department about the ultimate parent entity and the designated filing agent, as well as submitting the GloBE Information Return, unless it has already been filed in a qualified jurisdiction. If the effective tax rate falls below 15%, a Top-Up Tax Return must also be submitted, along with payment of any due tax. The first filings, covering fiscal years beginning January 1, 2025, will be due by June 30, 2027, with an extended 18-month filing period for the initial year. Non-compliance may result in significant penalties, including fines of up to 200% of the tax shortfall and a monthly surcharge of 1.5%, capped at 100% of the unpaid tax amount. 

Filing Obligations and Penalties 

The implementation of the top-up tax has notable implications for investment incentives, particularly those offered by the Board of Investment (BOI). While the new tax does not eliminate existing incentives, such as corporate income tax exemptions, it reduces their practical value by requiring additional payments to reach the 15% ETR threshold. To address this, certain BOI-promoted projects can convert their remaining exemption periods to a 10% corporate income tax rate for up to twice the original exemption period, capped at 10 years. Similarly, new BOI-promoted projects may be eligible for a 10% CIT rate for a limited period. MNEs must carefully evaluate whether these modified incentives remain advantageous under the new tax regime. 

Impact on BOI Incentives 

To comply with the new requirements, MNEs operating in Thailand are advised to take immediate steps to assess their potential liability. This includes reviewing group structures, effective tax rates, and the impact of any BOI incentives. Companies should ensure their administrative systems can handle data collection and meet the filing deadlines, including the submission of the GloBE Information Return, Top-Up Tax Return, and related notifications. Any planned reorganizations should also be reviewed for potential tax consequences. Given the complexity of the new regime, MNEs are encouraged to seek professional advice to develop a tailored compliance strategy and mitigate any risks. 

Example of Top-Up Tax in Practice 

As an example, ABC Global Group, a multinational enterprise, has a consolidated annual turnover of EUR 800 million and operates in several countries, including Thailand. In Thailand, ABC Global Group has a constituent entity named ABC Thailand Co., Ltd., which is subject to Thai corporate income tax. For the fiscal year 2025, ABC Thailand Co., Ltd. has a net income (as calculated under the GloBE Rules) of THB 100 million. However, due to existing Board of Investment tax incentives, ABC Thailand pays only THB 5 million in taxes, resulting in an effective tax rate of 5% in Thailand. 
Under the Emergency Decree, ABC Thailand’s effective tax rate is compared to the global minimum tax rate of 15%. Since the Thai ETR is below the threshold, ABC Thailand must pay a top-up tax to the Thai Revenue Department to make up the shortfall. 

The shortfall is calculated as: 
(15%−5%) x Net Income in Thailand, this equals to 
(10%)×100,000,000=THB 10 million. 

Thus, ABC Thailand Co., Ltd. will need to pay an additional THB 10 million as a top-up tax to the Thai Revenue Department to bring its effective tax rate in Thailand up to 15%. 

The Significance of Thailand’s Tax Reform 

Thailand’s adoption of the OECD’s global minimum tax is a step toward fairer taxation and enhanced economic sustainability under the OECD rule. If you have any questions about the Emergency Decree on Top-Up Tax or other areas of Thailand’s legal and tax framework, do not hesitate to contact us. 

If you have any questions about paying Tax, please feel free to reach out to us at [email protected]

About the Writer

Andreas Seela

Andreas primarily focuses on corporate/commercial, tax law, and real estate law. He previously worked for an international law firm in Germany and has experience in the Asian legal sphere. He holds a Master’s degree in business law and economics (LLM.oec.) and is currently working on his Ph.D. thesis at Chulalongkorn University in international law.

Andreas Seela