Thailand is set to implement the Global Minimum Tax (GMT), marking a significant change in its tax regime aimed at multinational enterprises (MNEs) operating within its borders. The Thai Ministry of Finance has announced the introduction of this tax, which will impose a minimum rate of 15% on MNEs with revenues exceeding 750 million euros, effective from January 1, 2025. This move aims to align Thailand with international efforts to curb tax avoidance practices and maintain the country’s tax revenue.
On December 27, 2024, the Ministry revealed details of the new tax regulations, which have been outlined within the newly ratified enhanced tax regulation, also referred to as พระราชกำหนดภาษีส่วนเพิ่ม พ.ศ. 2567. According to the Ministry, without such provisions on international taxation, Thailand risks losing substantial tax revenues to countries where similar laws already exist. Currently, there are 28 nations, such as Greece, South Korea, and Canada, which have already put such legislation to effect since the accounting period of 2023.
This new regulation will only apply to large MNEs operating within Thailand, regardless of whether they are Thai firms investing overseas or foreign companies investing domestically. The implementation of the GMT is driven by the necessity to uphold national interests and tax rights, allowing the government to collect revenue from businesses profiting within its jurisdiction. The tax is structured to take effect during accounting periods starting January 1, 2025, and is viewed as Thailand's proactive step toward participating effectively within the framework established by the Organisation for Economic Co-operation and Development (OECD).
The purpose of the Global Minimum Tax is to halt harmful tax competition among countries which, to some extent, has encouraged MNEs to evade taxes by shifting profits to low-tax jurisdictions. This international agreement involves more than 130 countries, presenting new obligations for companies and governments alike. Previously, Thailand had been collecting corporate taxes at the rate of 20%, albeit with exemptions for businesses incentivized by the Board of Investment (BOI). Those companies benefitting from such exemptions could effectively see their tax obligations become problematic once the GMT takes effect, as they will need to pay additional taxes to meet the minimum threshold.
“The collection of additional taxes will benefit the promotion of investment in Thailand based on financial sustainability,” stated Pin Sai Surasawadee, Director General of the Revenue Department. This emphasis highlights the balance between maintaining attractive investment conditions and implementing necessary tax regulations to secure national revenues.
Thailand’s corporate framework is positioned uniquely with respect to the GMT. Many domestic firms, already operating under the existing corporate tax rate, may find themselves at odds with this new minimum tax requirement. For example, firms directly benefiting from BOI incentives often report effective tax rates below the newly established minimum. This might result not only in adjustments to their financial strategy but also necessitate shifts in upper management and compliance systems to accommodate the enhanced tax obligations.
From January 2025, the Revenue Department intends to streamline the process, allowing electronic submissions for tax returns and related reports. This advancement will simplify compliance for firms, especially those unfamiliar with international tax obligations. Measures such as seminars and e-Learning systems will be implemented to facilitate the transition and educate firms about their new tax reporting requirements.
By aligning national tax policies with the OECD standards, Thailand not only contributes to global tax equity but also enhances its own reputation as a responsible jurisdiction for international businesses. It marks itself as part of the collective step forward to combat tax avoidance and to promote fair competition among nations.
The move reflects broader trends across the global economy as countries grapple with the repercussions of aggressive tax competition. European countries have been some of the forefront actors campaigning for this framework, with the primary aim to mitigate the impact of tax base erosion and profit shifting. Thailand’s decision to endorse the GMT circa 2025 aligns with these efforts and positions it within the international community as prepared to adapt to changing global norms on taxation.
To summarise, Thailand's implementation of the Global Minimum Tax presents both challenges and opportunities for multinational enterprises operating within the country. By reinforcing its tax regulations, it strives to maintain local economic stability and secure public revenue against the backdrop of global tax reform. Stakeholders and businesses will need to closely monitor these developments as Thailand moves toward 2025.
