Thailand’s Board of Investment Prepares to Introduce Pillar 2 Refundable Tax Credits

Thailand’s Board of Investment (BOI) has announced that Thailand will introduce Qualified Refundable Tax Credits (QRTCs) to mitigate the impact of tax laws to support the collection of a global minimum tax of 15% from large multinational enterprises that took effect from the beginning of this year (read more  Thailand enacts law to support the collection of 15% global minimum tax ).

Thailand’s Commission on the National Competitiveness Enhancement for Targeted Industries Policies, for which the BOI acts as the secretariat, has approved amendments to the National Competitiveness Enhancement for Targeted Industries Act to introduce QRTCs.  The amendments will add new rights and investment incentives, including tax credit refunds, and will be presented to the Cabinet for final approval before commencing the legislative process.

The Revenue Department will also work in parallel to adjust tax regulations to implement the changes, and ensure that the tax credits introduced meet the definition of QRTCs under the OECD’s global anti-base erosion (GloBE) rules. Under these rules, QRTCs are included in the computation of GloBE Income rather than a reduction of covered taxes when calculating the effective tax rate and top up tax.

The BOI estimates that around 1,500 companies in Thailand are likely to be affected by the country’s commitment to align with pillar two of the GloBE rules, the majority of which are foreign companies. QRTCs will be provided to BOI promoted companies for investment or expenditure in areas such as research and development, advanced skills development, production efficiency improvement, and sustainable investment, to enhance their competitiveness. These tax credits can be used to deduct various tax payments, or, if promoted companies have remaining tax credits, they can also claim cash refunds that will provide liquidity for business development.