Draft law aims to curtail profit shifting
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Draft law aims to curtail profit shifting

New rule expected next year

Revenue Department (photo courtesy of the department)
Revenue Department (photo courtesy of the department)

The Revenue Department expects draft legislation to collect taxes from multinational enterprises (MNEs) to prevent the shifting of profit to subsidiaries located in countries with a lower tax base to be implemented in 2025, which estimates suggest will boost tax revenue by 12 billion baht per year.

According to director-general Kulaya Tantitemit, the draft legislation includes the Top-up Tax Act, which aligns with the Pillar 2 principles of the Organisation for Economic Co-operation and Development's (OECD) members, and secondary legislation (subordinate laws).

The department already submitted the draft to the Office of the Secretariat of the Cabinet and is awaiting its inclusion in the cabinet meeting agenda.

As for subordinate laws, the department is drafting them and estimates they will be completed before the Top-up Tax Act is enacted, which is scheduled to take place as early as 2025.


According to Ms Kulaya, the draft of the country's Top-up Tax Act aligns with the resolutions of the OECD and G20, which serve as frameworks for international cooperation with 140 countries including Thailand.

The law includes provisions on measures to prevent tax base erosion and profit shifting, which are known as Pillar 2 Global Anti-Base Erosion Rules, as well as preventing tax competition to attract investment by setting a minimum corporate income tax rate (global minimum tax) of 15%.

Under the framework of the cooperation, if the profits of MNEs are shifted to subsidiaries in countries with tax rates below 15%, the MNEs would be required to pay the difference in taxation.

The cabinet approved the proposal by the Board of Investment (BoI) regarding the principles of this legislation in March 2023.

The Revenue Department was then tasked with drafting the legislation.

According to Ms Kulaya, the draft legislation has undergone public hearings, as specified in the constitution.

Based on the hearings, MNEs subject to Pillar 2 were found to understand and be prepared to comply with the rules because they form a common standard among countries.

She said comments during the hearings focused on practical questions, such as the differences between Thai accounting standards and those used to calculate the Top-up Tax.

The hearings also included discussions with the Federation of Accounting Professions and inquiries regarding the format of documents required for compliance with the tax law.

Companies entitled to tax privileges and benefits from the BoI under the Investment Promotion Act remain unchanged with the draft, said Ms Kulaya.

However, if the effective tax rate calculated for all companies within an MNE in Thailand is less than 15%, the MNE is liable to pay a top-up tax to reach 15%, according to the draft law and the Pillar 2 tax collection standards.


The OECD plans to propose another tax principle for Thailand and member countries: a tax on the allocation of profits of large MNEs that must be distributed to various countries (Pillar 1).

Pillar 1 proposes a new international tax framework by levying taxes based on the profit allocation of MNEs with global income (according to consolidated financial statements) exceeding €20 billion (786 billion baht) and a combined profit rate exceeding 10% of income.

Profits exceeding 10% of income must be allocated tax-proportionally to countries where the MNE invests and generates income (market jurisdictions) at 25% of excess profits beyond 10% of the income.

Economic nexus points must be considered from the revenue generated in market jurisdictions of at least €1 million (39.3 million baht), according to the OECD.

The implementation of Pillar 1 still has issues that require clarification, such as establishing clear tax certainty between countries, including details of profit allocation taxes.

The tax principle also requires a sufficient number of countries to sign the agreement, including the US, which is expected to have a significant number of companies in Pillar 1 that must share profits with market jurisdictions.

Draft legislation related to Pillar 1 is being considered by the US Congress, Ms Kulaya said.

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