Top-up Tax (Pillar 2)

Groups with the following characteristics should begin assessing early whether they fall within the scope of the Emergency Decree on Top-up Tax, and how significant the impact would be.

• Multinational enterprise groups whose consolidated group revenue meets the threshold. Groups whose revenue under the consolidated financial statements for the preceding year meets the prescribed threshold, particularly where a group entity is located in Thailand or uses Thailand as an operating base.
• Groups with entities in low-tax countries or entities enjoying tax incentives. If a group entity is granted an exemption from or reduction of corporate income tax in Thailand or another country, its effective tax rate may fall below the minimum rate, which may give rise to a top-up tax liability in the country entitled to collect it in the order of priority prescribed by law.
• Groups with complex cross-border shareholding structures. Groups whose parent company, subsidiaries, or related entities are spread across several countries must check which entities fall within the group as defined by law, and which country has the first right to collect the top-up tax.
• Groups whose foreign parent company or head office has begun work on Pillar 2. If the parent company or the global group has already begun preparing for the top-up tax at group level, the Thai entities within that group should understand the potential impact on themselves and the information the group will require from Thailand.

Falling within the scope of the top-up tax affects a group in several dimensions: the tax burden, reporting, and internal management systems.

• Potential top-up tax liability. If the effective tax rate of the group entities in any one country falls below the minimum rate set by law, a top-up tax liability may arise in the country entitled to collect it in the order of priority prescribed by law, which must be considered together with the rules allocating taxing rights among countries.
• Impact on tax incentives currently enjoyed. A group whose Thai entities receive tax incentives, such as an exemption from or reduction of corporate income tax, must assess whether those incentives bring the ETR below the threshold and, if so, which entity in the group will bear the obligation for that portion of top-up tax.
• Statutory reporting and filing obligations. The law imposes reporting and filing obligations on in-scope groups, which may call for financial and tax information at a level of detail that may not yet exist in current systems. Preparing the data systems in advance is therefore important.
• Impact on group structure and group tax policy. The effect of the top-up tax may bear on the group's long-term operating and investment structure, as well as its transfer pricing policy and the database used in the impact assessment, which is also linked to the group's transfer pricing data.

Our services in this area focus on helping the group understand its own position and prepare in a systematic way, not on offering tax avoidance techniques.

• Preliminary scope and status screening. We make a preliminary assessment of whether the group falls within the scope of the Emergency Decree on Top-up Tax, analyzing the group structure, consolidated revenue, and the basic information available, so that the group knows what the next step should be.
• Preliminary impact assessment. We assess the overall effective tax rate at the level of each relevant country, to identify in which countries a top-up tax liability may arise and how urgent the preparation is.
• Data organization and governance. We support the group in identifying the necessary data sources, defining the processes for gathering and verifying the data, and structuring internal responsibilities to suit the group's circumstances.
• Advice on Thai top-up tax law. We advise on the provisions of the Emergency Decree on Top-up Tax B.E. 2567 (2024) and the related secondary legislation, so that the group understands its obligations and the time frames for compliance under Thai law.

The data used in the group's transfer pricing, such as profit allocation and the analysis of transactions between associated enterprises, may be linked to the database used to assess the top-up tax impact. A well-designed transfer pricing data system may therefore also assist with top-up tax readiness.