After the past years of attempt to endorse Base Erosion and Profit Shifting or BEPS project initiated by the Organization for Economic Cooperation and Development (the ‘OECD’), the Thai government finally published the Emergency Decree on Top-up Tax B.E. 2567 (the ‘Emergency Decree’) on the Thai Royal Gazette on 26 December 2024. The law will be in force since 1 January 2025 onwards.
The Emergency Decree contains 7 chapters; while, the key legal provisions can be seen in Chapter 2 and Chapter 3, which particularly focuses on (i) Collection of Top-up Tax and (ii) Reporting Obligations, Top-up Tax Payments, and Top-up Tax Refunds, respectively.
In respect to Chapter 2, criteria of taxable person for the Top-up Tax is set out that any legal entity within a group of multinational companies, which is located in Thailand and is a member of a such group that has the total group consolidated revenue according to the financial statements of the ultimate parent entity of the group not less than the equivalent of 750,000,000 euros or its equivalent in Thai currency for at least two accounting periods within the four accounting periods prior to the current accounting period in which the top-up tax obligations are considered, shall be subject to the top-up tax liability.
In addition to the above, each legal entity in the group shall be liable for the Top-up Tax payment calculated on a basis of the Top-up Tax that arises in low-tax jurisdictions for such group in each accounting period. In this regard, the low-tax jurisdiction is legally referred to the country, in which the group of multinational companies is located, has the Net GloBE Income in the accounting period but has the Effective Tax Rate in the accounting period lower than the minimum tax rate or 15%. In all cases, the low-tax jurisdiction shall be considered on a basis of each accounting period and for each group located in that country.
For any legal entity within the group of multinational companies, which is located in Thailand and subject to the Top-up Tax liabilities, the Emergency Decree requires those entities to report by submitting (i) a Notification with required information; (ii) the GloBE Information Return, (iii) the Top-up Tax payment form, including making all payments for the Top-up Tax to the Revenue Department of Thailand within fifteen months from the last day of the accounting period of the ultimate parent entity of the group. The revenues generated from the collection of the Top-up Tax will be allocated to the National Competitiveness Enhancement Fund to support investments by businesses operating in Thailand.