Thailand BOI announces new measure for companies impacted by global minimum tax under the BEPS 2.0 Pillar Two project

Local contact

EY Global
9 Jun 2023
Subject Tax Alert
Categories Corporate Tax BEPS 2.0
Jurisdictions Thailand

Show resources
  • The Board of Investment of Thailand (BOI) has announced a new measure to alleviate potential impacts from the implementation of BEPS 2.0 Pillar Two on existing tax incentive programs and uphold Thailand's attractiveness as an investment destination for multinational enterprises (MNEs).
  • The new measure applies to both existing BOI-promoted companies and new BOI applicants with consolidated group revenue of not less than THB 28,000 million / EUR 750 million or falling within the scope of a Country-by-Country Report.
  • In-scope MNEs with existing BOI incentives and/or those with a plan to apply for new BOI incentives should (i) perform an impact assessment on Pillar Two to determine whether their effective tax rate for Thailand could fall below 15%, and (ii) undertake a tax-incentive feasibility study by revisiting their BOI tax profile to determine whether the MNE should consider converting to or applying for the new corporate income tax reduction regime.

Detailed discussion

The Board of Investment of Thailand (BOI) announced a relief measure with immediate effect for both existing BOI companies and new BOI applicants with consolidated group revenue of not less than THB 28,000 million/EUR 750 million or falling within the scope of a Country-by-Country Report.

This relief measure aims to alleviate potential impacts of the global minimum tax and uphold Thailand's attractiveness as an investment destination for MNEs.

The new incentive package is summarized below:

  Existing BOI promoted companies New BOI applicants
Alternatives for qualified investors Option to convert from their current tax exemption regime to a 50% reduction of normal corporate income tax rate regime, resulting in a reduced corporate income tax rate of 10%

Option to choose between:

  • "Tax exemption regime" with the flexibility to subsequently convert to the tax reduction regime
  • "Tax reduction regime"
Period Twice the remaining full-year incentive period, but capped at 10 years

Tax exemption regime:

  • Standard tax exemption period depending on the type of BOI activities

Tax reduction regime:

  • Twice the standard incentive period, with a maximum cap of 10 years
Start date From the date revenue is first generated after receiving a new BOI certificate From the date revenue is first generated
Other rights and incentives Remain unchanged Same as those under the basic incentive package
Key conditions and criteria
  1. The applicant must be an MNE group company with a consolidated revenue of not less than THB 28,000 million/EUR 750 million or be subject to the Country-by-Country Report requirement for the accounting period prior to the application.
  2. The applicant must be eligible for or currently enjoying the basic BOI incentive without any add-on special incentive regimes (e.g., production efficiency improvement, etc.)
  3. For an existing BOI-promoted company, the applicant must have a remaining corporate income tax exemption period of at least one year, and the cumulative amount of corporate income tax exemption must not have reached the capped amount.
  4. The applicant is required to comply with relevant application procedures.

The BOI may later release additional guidelines and relevant clarifications.

Implications

In-scope MNEs with existing BOI incentives and/or those with a plan to apply for new BOI incentives are recommended to conduct a Pillar Two impact assessment to determine whether their effective tax rate for Thailand could fall below 15%, resulting in the imposition of Top-Up Taxes once Pillar Two is implemented. In such cases, MNEs should consider undertaking a tax incentive feasibility study, which should involve a review of their BOI tax profile and an assessment of their eligibility, to determine whether it would be beneficial and whether timing is appropriate for the MNEs to convert to or apply for the new corporate income tax reduction regime.

 

For additional information concerning this Alert, please contact the following:

EY Corporate Services Limited, Bangkok
  • Yupa Wichitkraisorn
  • Kasem Kiatsayrikul
  • Pathira Lam-ubol
  • Sarunya Sutiklang-viharn
Ernst & Young LLP (United States), Thai Tax Desk, New York
  • Pariyanuch Ngamcherdtrakul
Ernst & Young LLP (United States), ASEAN Tax Desk, New York
  • Bee-Khun Yap
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
  • Gagan Malik
  • Dhara Sampat
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
  • Pongpat Kitsanayothin

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.