Thailand is preparing to introduce the Global Minimum Tax (“GMT”) by next year, complying with the Organization for Economic Co-operation and Development’s (“OECD”) framework, which ensures that large multinational corporations pay a minimum effective tax rate of 15%. This initiative addresses tax avoidance and aligns Thailand with global standards for fairer taxation in the digital economy.
The GMT is essential part of a two-pillar framework developed by the OECD and the G20 countries. The purpose of GMT is to curb tax avoidance by multinational enterprises (MNEs) and ensure they pay an appropriate tax where they operate, even if they have no physical presence there. The key component of the framework consists of:
- Pillar 1: This involves the reallocation of profits and taxation rights from large multinational enterprises (MNEs) to ensure fairer distribution. It aims to ensure that countries where these companies operate, even if they do not have a physical presence, can still claim their share of taxes.
- Pillar 2: This pillar focuses on implementing a Global Minimum Tax on large multinational corporations to reduce tax competition between countries. It establishes a minimum effective tax rate (ETR) of no less than 15% for these large multinational enterprises, ensuring that they pay a fair share of taxes.
Currently, the Revenue Department of Thailand has introduced a new draft on Tax Act, which proposes the imposition of additional taxes on MNEs to meet the 15% minimum tax threshold. The Act has passed public hearings and is expected to be proposed to the Cabinet soon, aiming for the implementation in 2025.
Approximately 1,200 multinational corporations operating in Thailand will be subject to the 15% minimum tax. In addition, the Board of Investment (BOI) has prepared financial measures to mitigate the impact on both existing and new investors. Companies that fall under the GMT provisions will see tax incentives adjusted, including a shift from tax exemptions to reduced corporate tax rates for an extended period, not exceeding 10 years. For the companies which are not under the GMT threshold, traditional tax incentives and exemptions will remain effective.
Thailand’s legal framework is in the process of adjusting to the realities of the GMT under Pillar 2. While there is strong alignment with international standards, challenges remain in balancing between domestic economic policies and global tax fairness. With strategic advantages such as location, transportation, infrastructure, and collaboration between public and private sectors, Thailand is well-positioned to attract more investments in key industries like automobiles, electronics, and electric vehicles over the next three to five years.