New minimum tax rates for international corporations: Thailand offers a solution
The Board of Investment of Thailand (BOI) has come out with a new initiative, effective immediately, to help reduce the likely tax pressure following the introduction of the second component of the BEPS 2.0 project on existing tax incentive programmes and to maintain Thailand's attractiveness as an investment destination for companies operating in international markets. The initiative applies to companies already receiving BOI support as well as to new applicants with total group revenues of at least 28,000 million baht/750 million euros or falling under the provisions of the Country-by-Country Report.
In brief, the incentive package includes a choice between two regimes:
- "Tax exemption regime" with the option of subsequently switching to a tax reduction regime. A standard tax exemption period applies, depending on the type of business activity.
- "Tax reduction regime". Available for twice the incentive period, with a maximum limit of 10 years.
Starting date: from the moment of receipt of the income.
Key criteria for companies wishing to participate in the new BOI initiative:
- The applicant must be part of a multinational company with total revenues of at least Baht 28,000 million/750 million EUR or fall within the requirements of the Country Combined Report for the reporting period prior to application.
- The applicant must be eligible for the current basic BOI incentive without any additional special requirements (e.g. production efficiency improvements and others).
- A company already receiving BOI support must have at least one year of income tax exemption in reserve, and the cumulative amount of the corporate income tax exemption must not reach the limit.
- The applicant must follow the appropriate application procedures.
The BOI may subsequently provide further guidance and clarification.
For multinational corporations already participating in BOI programmes or planning to apply for such programmes, it is recommended that a second pillar impact assessment be conducted to determine whether their effective tax rate in Thailand could fall below 15%, resulting in a tax increase once the second pillar is implemented. In such cases, it is recommended to consider conducting a tax assessment of BOI incentives, which includes an analysis of the tax profile of the enterprise under BOI programmes and an assessment of their eligibility to understand whether the BOI initiative would be beneficial to the enterprise and whether the timing of the transition to or application of the new income tax reduction regime is appropriate for a particular international company.
Thailand is not blacklisted by the EU or FATF and is not an offshore jurisdiction. Here you can open an account with one of the local banks and not be linked to a specific payment system. Thai banks offer favourable rates and the ability to conduct transactions in 16 world currencies, including the RMB.
Registering a business in Thailand allows:
- Expose the business to the Asian market.
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- Free yourself from restrictions on residency requirements for major shareholders and directors.
- Control your cash flow from anywhere in the world with convenient online banking in English.
- Exempt from VAT, import or export duties.
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