The government says it is committed to implementing an emergency decree for the so-called Top-Up Tax in 2025, with expectations of increasing state revenue by over 10 billion baht per year.
According to Deputy Finance Minister Julapun Amornvivat, the government is expediting the drafting of legal provisions with a view to completing them this year and ensuring they align with the annual tax year framework, which will run from January to December 2025. If the draft is not completed by the end of 2024, the tax cannot be collected, leading to a delay of another year.
"This is a matter of 'first-mover advantage'. Thailand aims to be one of over 20 countries worldwide to take the lead in implementing this legal mechanism in a serious and pioneering manner, starting on Jan 1, 2025," said Mr Julapun.
The Top-Up Tax is a mechanism designed to ensure that multinational corporations pay a minimum level of corporate income tax, typically aligned with the global minimum tax (GMT) initiative led by the Organisation for Economic Co-operation and Development (OECD).
The draft emergency decree for the Top-Up Tax has already been approved by the cabinet and is currently undergoing the drafting process. As an emergency decree, the government has the executive authority to enact it immediately, after which it will be submitted to parliament for ratification.
In addition, the government needs to amend the National Competitiveness Enhancement Act because the revenue collected from the Top-Up Tax will be allocated to the National Competitiveness Enhancement Fund.
Mr Julapun said that based on discussions with foreign investors, most multinational companies are already aware that they will soon be required to pay this tax. If a multinational corporation pays corporate income tax at a rate below 15%, it will need to pay the difference (to reach 15%) in the country where its parent company is headquartered. Many multinational companies have also expressed a preference to pay the 15% tax rate in Thailand, he said.
However, he noted that the Top-Up Tax may affect multinational companies that previously paid lower tax rates. Nonetheless, Thailand has measures in place to support and promote investment from these multinationals. Once the Top-Up Tax is implemented, the additional revenue generated will be allocated to the National Competitiveness Enhancement Fund to support investments by businesses operating in Thailand.
The National Competitiveness Enhancement Fund will allocate a portion of the tax revenue collected to support initiatives such as improving production structures, promoting the green economy, and reducing PM2.5 pollution. These benefits will be provided to multinational companies that choose to pay the 15% corporate income tax rate in Thailand.
The GMT represents a global tax reform initiative led by the OECD, which began in 2021. It has already achieved agreement on one of its two pillars: establishing a GMT. This agreement, endorsed by 160 countries representing about 90% of the global economy, sets a global corporate income tax floor of no less than 15%. The aim is to close loopholes in the global tax system and reduce profit shifting to low-tax jurisdictions, while also preventing the erosion of tax bases in individual countries.
The GMT Agreement applies exclusively to multinational companies with annual global revenues exceeding €750 million (about US$870 million). Participating countries can impose a minimum corporate income tax rate of 15% on multinational companies meeting this revenue threshold and operating within their jurisdictions. If a subsidiary of such a multinational company is located in a country with a corporate income tax rate below 15%, the parent company's home country has the right to collect the tax shortfall to meet the 15% threshold.
