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This page is an English translation of the Thai original, provided for information. The Thai text prevails.
Contents
- The Problem That Started It All
- Who Is in Scope?
- Three Abbreviations to Know
- How the Mechanism Works, Step by Step
- The Three Main Mechanisms of Pillar Two
- The Emergency Decree on Top-up Tax B.E. 2567 (2024): How Thailand Applies the Rules
- What It Means in Practice for Business Owners and CFOs
- Summary: Five Points to Remember
- Frequently Asked Questions about the Global Minimum Tax
The Problem That Started It All
Large multinational groups operate in dozens of countries and can structure their affairs so that profits appear in countries with low tax rates or no corporate income tax at all, while the countries where the income is actually generated collect very little tax.
The result is tax competition between countries, often called a "race to the bottom" or a "tax war": countries cut their corporate tax rates to attract investment, and the tax base of many countries shrinks significantly.
The OECD/G20 Inclusive Framework, under the Base Erosion and Profit Shifting (BEPS) project, therefore designed a new set of rules known as Pillar Two, also called the Global Minimum Tax (GMT), to end this game. Under these rules, large multinational groups must pay tax at an effective rate of at least 15% wherever in the world they operate.1
The GMT is a "15% minimum tax" that applies to large multinational groups. If a group pays less than 15% in a particular country, the countries concerned have the right to collect the shortfall in the order set by the rules.
Who Is in Scope?
Not every company is affected. The GMT is designed only for large multinational enterprise groups (MNEs), and the threshold is clear.
Revenue in the consolidated financial statements of the Ultimate Parent Entity (UPE) of not less than the Thai baht equivalent of EUR 750 million in at least two of the four preceding accounting periods (Section 26).
The entities subject to tax under Section 26 are the constituent entities located in Thailand of a group that meets this threshold, whether the ultimate parent entity is located in Thailand or abroad.2
Company A is a parent company in Germany. The group's revenue in its consolidated financial statements has been around EUR 900 million a year for several years, and it has subsidiaries in Thailand, Japan and Vietnam. The A group is in scope because its consolidated revenue was at least EUR 750 million in at least two of the four preceding accounting periods. Its Thai subsidiary is therefore subject to the Emergency Decree on Top-up Tax as well.
Company B is a Thai SME with revenue of 500 million baht a year and no companies abroad. Company B is not in scope.
Three Abbreviations to Know
Before reading further, here are three abbreviations that appear throughout this topic:
| Abbreviation | Meaning | Short explanation |
|---|---|---|
| ETR | Effective Tax Rate | The tax rate a group actually bears in each country (not the statutory rate on paper) |
| GloBE | Global Anti-Base Erosion | The formal name of the OECD Pillar Two rules, which served as the model for Thailand's Emergency Decree on Top-up Tax |
| QDMTT | Qualified Domestic Minimum Top-Up Tax | A domestic top-up tax: Thailand collects the shortfall itself first, instead of leaving it to other countries |
How the Mechanism Works, Step by Step
The idea behind the GMT is to "top up to the minimum": if the tax a group actually pays in a country is below 15%, the shortfall is collected up to 15% by the government of the country concerned, in the order of priority set by the rules.
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1Calculate the ETR in each country At the end of each fiscal year, the group must calculate, for every country in which it operates, the tax it actually bears (the ETR) as a percentage of its GloBE profit.
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2Identify countries where the ETR is below 15% Any country where the ETR is below 15% has a "shortfall" (top-up amount) that must be paid. For example, if the ETR in Thailand is 10%, the shortfall is 5%.
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3Who collects the shortfall? The order of priority is: the country where the entity is located collects first (QDMTT) → if it does not, the country where the parent company is located collects through the IIR → if neither collects, other countries collect through the UTPR.
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4Thailand chose to collect a QDMTT itself The Emergency Decree on Top-up Tax B.E. 2567 (2024) provides for a domestic top-up tax in Thailand, so Thailand has the first right to collect the shortfall of constituent entities located in Thailand, rather than leaving it to other countries. This is a key reason why Thailand made the law effective from 2025.
If Thailand did not collect a QDMTT itself, the top-up tax owed by Thai subsidiaries would flow to other countries instead, such as the country where the parent company is located. Thailand would lose that tax revenue for nothing in return.
The Three Main Mechanisms of Pillar Two
IIR — Income Inclusion Rule
The rule that lets the parent country (where the UPE is located) collect the shortfall on subsidiaries that pay less than 15% abroad. This is the primary mechanism.
UTPR — Undertaxed Profits Rule
A backstop for cases the IIR does not cover, or where the parent company's country has not yet adopted the GMT rules. It allows other countries where the group has constituent entities to collect the shortfall.
QDMTT — Qualified Domestic Minimum Top-Up Tax
The host country (for example, Thailand) chooses to collect the shortfall itself first, keeping the tax revenue in its own country.
The Emergency Decree on Top-up Tax B.E. 2567 (2024): How Thailand Applies the Rules
The Emergency Decree on Top-up Tax B.E. 2567 (2024) (พระราชกำหนดภาษีส่วนเพิ่ม พ.ศ. 2567) was given on 25 December 2024 (B.E. 2567) and came into force on 1 January 2025 (B.E. 2568) under Section 2.3
The Emergency Decree brings all three mechanisms into Thai law: the foreign top-up tax under Section 42, which corresponds to the Income Inclusion Rule (IIR); the residual top-up tax allocated to Thailand under Section 44, which corresponds to the Undertaxed Profits Rule (UTPR); and the domestic top-up tax of Thailand under Section 52, which corresponds to the QDMTT. Under Section 38, a qualified domestic top-up tax that a group has already paid in the country where it is located is deducted from the top-up tax arising in that country.4 For Thai subsidiaries, the most important part is the domestic top-up tax: if an in-scope group's effective tax rate in Thailand is below 15%, the Revenue Department has the right to collect the shortfall before any other country.
Company C is the Thai subsidiary of a German MNE group, with GloBE profit in Thailand of 100 million baht (assume, for illustration, that there is no Substance-based Income Exclusion, or SBIE).
Company C receives a tax exemption from the BOI, so the tax it actually pays is only 5 million baht, an ETR of 5%.
The shortfall against 15% is 10% × 100 million baht = 10 million baht, which is the amount the Thai Revenue Department can collect as a QDMTT.
Without a QDMTT in Thailand, this 10 million baht would become tax revenue of Germany through the IIR instead.
What It Means in Practice for Business Owners and CFOs
It depends on the position of the business:
If your company is not in scope (the group's consolidated revenue is below the EUR 750 million threshold) — the GMT does not affect you directly, but it is worth understanding because it may affect Thailand's investment environment in the long term.
If your company is a subsidiary of an in-scope MNE — be aware that tax incentives from the BOI or other measures may no longer "save" tax for the group as a whole, because the shortfall will be collected through the GMT instead. The next article in this series covers this in detail.
If your company is a constituent entity located in Thailand of an in-scope group, whether it is the Ultimate Parent Entity (UPE) or a subsidiary — Section 55, paragraph one, requires each constituent entity to file a GloBE Information Return with the Revenue Department within 15 months from the last day of the ultimate parent entity's accounting period, unless either (1) it has designated another constituent entity of the same group located in Thailand to file on its behalf and that filing has been completed (Section 55, paragraph two), or (2) the exemption in Section 56 applies: the ultimate parent entity, or a constituent entity designated by it, has already filed the return in the country where it is located, and that country has a competent authority agreement with Thailand for the automatic exchange of GloBE information returns that is in effect for the accounting period concerned. A constituent entity with top-up tax payable must also file a return and pay the tax within the same 15 months under Section 57, and for the first accounting period in which the group is in scope, Section 58 extends these deadlines to 18 months.5 Preparing the data therefore requires very detailed accounting systems and information from the whole group.
Not sure whether your company is within the scope of the GMT, or want to know the current ETR of your group in Thailand?
The scope of work, process and documents used in the impact assessment are set out on the page Top-up Tax Impact Assessment under the Pillar Two Rules.
Initial consultation with a legal consultant →Summary: Five Points to Remember
One — The GMT is a 15% minimum tax for multinational groups with consolidated revenue of at least EUR 750 million in at least two of the four preceding accounting periods.
Two — Thailand enacted the Emergency Decree on Top-up Tax B.E. 2567 (2024), which includes a domestic top-up tax, so Thailand can collect the shortfall of businesses in Thailand before other countries.
Three — If a group pays less than 15% in a country, top-up tax may be payable (after the deduction allowed under the SBIE), either to that country or to other countries through the IIR or UTPR.
Four — Constituent entities located in Thailand must file the GloBE information return within 15 months from the last day of the ultimate parent entity's accounting period, unless another Thai constituent entity files on their behalf or the Section 56 exemption applies; those with top-up tax payable must also file the tax return and pay the tax within the same period. For the first accounting period in scope, these deadlines are extended to 18 months (Sections 55 to 58).
Five — The next article explains how the GMT affects BOI incentives and what BOI-promoted companies should do.
Frequently Asked Questions about the Global Minimum Tax
In Thailand, the legal basis of the Global Minimum Tax, or Pillar Two, is the Emergency Decree on Top-up Tax B.E. 2567 (2024), in force since 1 January 2025. The questions below summarize what the rules mean, the scope threshold under Section 26, and the order of priority among the domestic top-up tax, the IIR and the UTPR, so that executives and finance teams can make an initial assessment of whether their group needs to prepare.
- What is the Global Minimum Tax?
- The Global Minimum Tax (GMT), or Pillar Two, is a set of rules under the OECD/G20 Inclusive Framework that requires large multinational groups to pay tax at an effective rate of at least 15% in each country where they operate. If the rate is lower, the shortfall is collected as a top-up tax. Thailand applies these rules through the Emergency Decree on Top-up Tax B.E. 2567 (2024), in force since 1 January 2025.
- What is Pillar Two, and is it different from the Global Minimum Tax?
- They are the same thing. Pillar Two is the second pillar of the OECD/G20 BEPS project, while Global Minimum Tax is the name for its effect, a minimum tax of 15%. The OECD model rules are called the GloBE Rules, and they served as the model for Thailand's Emergency Decree on Top-up Tax B.E. 2567 (2024).
- Which companies are subject to top-up tax in Thailand?
- Under Section 26 of the Emergency Decree on Top-up Tax B.E. 2567 (2024), multinational groups whose revenue in the consolidated financial statements of the ultimate parent entity is not less than the Thai baht equivalent of EUR 750 million in at least two of the four preceding accounting periods. Entities that are not part of a group meeting this threshold are not in scope.
- Through which mechanisms does Thailand collect top-up tax?
- The Emergency Decree on Top-up Tax B.E. 2567 (2024) includes a domestic top-up tax (QDMTT), which lets Thailand collect the shortfall of constituent entities located in Thailand before other countries, together with the IIR, collected through the parent company, and the UTPR, a backstop where no country has yet collected. The order of priority therefore starts with the country where the business is located.