Global Minimum Tax and the Emergency Decree on Top‑Up Tax
The Organisation for Economic Co‑operation and Development (OECD) and the G20 have agreed to introduce a 15 % global minimum corporate tax rate for large multinational enterprise (MNE) groups. Under this regime, MNEs with consolidated revenues of at least €750 million must pay a minimum tax of 15 % on their accounting profits in every jurisdiction where they operate Thailand’s Ministry of Finance and Revenue Department responded by drafting the Emergency Decree on Top‑Up Tax B.E. 2567 (2024), which was approved by the Cabinet on 11 December 2024 and promulgated on 26 December 2024.
According to the Revenue Department’s announcement, the decree applies to accounting periods starting 1 January 2025 and is intended to allow Thailand to retain its right to collect additional tax revenue while aligning with the OECD’s Pillar‑Two rules. The decree introduces a top‑up tax that applies to both Thai and foreign MNEs operating in Thailand when their effective tax rate is below 15 %. The emergency decree’s dual mechanism consists of a domestic top‑up tax and an income‑inclusion rule: the domestic top‑up tax ensures Thai operations are taxed at the 15 % minimum, while the income‑inclusion rule determines when income earned by Thai entities in low‑tax jurisdictions must be included in the parent company’s taxable income. The Revenue Department noted that secondary legislation will provide additional details on compliance and reporting requirements.
Board of Investment (BOI) Incentives under the Global Minimum Tax
News reports suggested that Thailand might scrap its longstanding tax exemptions in response to the global minimum tax. However, the Office of the Board of Investment (BOI) clarified that existing tax incentives, including exemptions and reductions, will remain available. Narit Therdsteerasukdi, Secretary‑General of the BOI, stated that the BOI and the Finance Ministry are developing a new instrument called the Qualified Refundable Tax Credit (QRTC). The QRTC is intended to provide an alternative incentive and mitigate the impact of the top‑up tax for MNEs subject to the OECD’s minimum tax rules.
Mechanism of the Qualified Refundable Tax Credit
The QRTC allows qualifying investments and expenditures to be treated as refundable tax credits rather than traditional tax holidays. According to the Royal Thai Government’s release, credits may be calculated from spending on research and development, high‑skill workforce development, upgrading standards, and efficiency‑improvement investments. These credits can then be used to offset corporate tax or other taxes as designated by the Ministry of Finance. The BOI noted that unused credits may be refunded, providing companies with immediate liquidity while continuing to encourage investments that enhance Thailand’s competitiveness. Importantly, the QRTC will coexist with existing tax incentives; investors that do not fall within the scope of the global minimum tax may continue to apply for standard BOI exemptions and reductions.
Implications for Investors
For large MNEs affected by the global minimum tax, Thailand’s policy realignment means that corporate income tax (CIT) exemptions could become less valuable. Instead of a full tax holiday, qualifying projects may elect to convert their CIT exemption into a 50% CIT reduction, resulting in an effective rate of 10%, for up to twice the remaining exemption period (subject to a 10‑year cap) according to advisory interpretations of BOI Announcement No. 1/2023. The pending QRTC mechanism provides another option for MNEs: they can receive tax credits tied to productivity‑enhancing expenditures. These credits reduce the risk of triggering top‑up taxes under Pillar Two while still rewarding investments that align with national development goals.
Outlook
Thailand’s approach demonstrates that the country intends to comply with OECD global minimum tax rules without undermining its investment competitiveness. By enacting the Emergency Decree on Top‑Up Tax and developing the QRTC, the government seeks to ensure that MNEs pay an effective rate of at least 15 %, while still offering incentives that encourage high‑value activities such as R&D and workforce development. Further details on the QRTC, including the criteria for refundability and administrative procedures, are expected once the Ministry of Finance finalizes subordinate regulations. In the meantime, businesses should assess how the global minimum tax and the BOI’s evolving incentive framework might affect their investment structures and consider engaging legal counsel to optimize their tax positions within Thailand’s changing regulatory landscape.