Thailand’s Adjustment of Investment Promotion Measures in Alignment with the OECD Global Minimum Tax:Implications for BOI-Promoted Manufacturing Companies.

• Thailand is currently revising its investment-related tax incentive system to align with the OECD’s Global Minimum Tax (GMT) framework. This marks a significant change in the country’s investment promotion policy, particularly for companies receiving investment privileges from the Thailand Board of Investment (BOI), an agency of the Prime Minister’ Office.

• The Global Minimum Tax rules, also known as Pillar Two, require large multinational enterprise groups with consolidated global revenues of at least EUR 750 million to pay a minimum corporate tax rate of 15%. The objective is to reduce cross-border profit shifting and limit international tax competition through excessive tax exemptions.

• In the past, Thailand’s BOI has played a significant role in attracting foreign investment, particularly in the manufacturing sector, through tax-based investment promotion measures. The BOI grants corporate income tax exemptions ranging from 3 to 8 years, which may be extended up to 13 years for targeted industries or projects involving additional investment in technology and innovation, depending on the type of business, level of technology, and investment value. Industries that have continuously benefited from these incentives include the automotive, electronics, petrochemical, and advanced manufacturing sectors.

• However, under the OECD Global Minimum Tax rules, “Tax Holiday” incentives may no longer provide full benefits for large multinational enterprise groups. If a company’s effective tax rate falls below 15%, the parent company’s home country may impose an additional “Top-up Tax.” As a result, many countries, including Thailand, are required to revise their investment promotion policies.

• Thailand is currently preparing to implement the Global Minimum Tax framework. The rules will apply to multinational enterprise groups with consolidated global revenues of at least EUR 750 million, while companies below this threshold are not expected to be directly affected by the OECD GMT rules.

• As a result, Thailand continues to place importance on maintaining its investment competitiveness, particularly for companies whose global sales remain below the specified threshold. New investment promotion measures, or Corporate Tax Incentives (CTI), therefore focus more on qualitative support, such as technology development, research and development (R&D), workforce skill development, and competitiveness enhancement, rather than relying solely on long-term tax holidays.

• For the manufacturing sector, Thailand continues to designate it as one of the country’s key targeted industries. The BOI continues to grant investment incentives to businesses in various sectors, including:

  • Advanced electronics industry
  • Electric vehicles (EV)
  • Automation and robotics
  • Biotechnology
  • Medical devices
  • Green industries and sustainable manufacturing

• In addition, the BOI is expected to consider new forms of investment promotion measures that are more aligned with OECD guidelines, such as the use of Refundable Tax Credits or Qualified Tax Credits instead of traditional tax exemptions. This would help Thailand maintain its competitiveness in attracting foreign investment under the new international tax framework.

• In practice, the impact of these changes will vary depending on the size of the company, as follows:

  • Large multinational enterprise groups subject to the OECD GMT rules may receive reduced benefits from Tax Holiday incentives, as they may be required to pay additional Top-up Tax.

  • Meanwhile, small and medium-sized enterprises (SMEs), including companies with global revenues below the specified threshold, can still benefit from BOI investment promotion measures with relatively limited direct impact.

• Overall, these policy adjustments reflect Thailand’s efforts to maintain a balance between complying with international tax standards and preserving the country’s investment competitiveness, particularly in the manufacturing sector, which remains a key driver of the Thai economy.

• These adjustments are also aligned with the Thai government’s long-term objective of pursuing OECD membership in the future through the enhancement of legal, economic, and transparency standards in line with international practices.

Advantages and Opportunities from the New Tax Framework

• Although the implementation of the OECD Global Minimum Tax may reduce the effectiveness of traditional tax incentives for some companies, the changes could also help enhance the quality of investment in Thailand over the long term. The new incentive framework is expected to place greater emphasis on technology, innovation, research and development (R&D), and workforce skill development. This may strengthen the competitiveness of Thai industries and support more sustainable economic growth.

• In addition, aligning Thailand’s tax system with international standards may help improve foreign investor confidence, increase tax transparency, and support Thailand’s long-term objective of pursuing OECD membership in the future. Overall, these policy adjustments reflect Thailand’s efforts to maintain a balance between complying with international tax standards and preserving the country’s investment competitiveness, particularly in the manufacturing sector, which remains a key driver of the Thai economy.

• These adjustments are also aligned with the Thai government’s long-term objective of pursuing OECD membership through the enhancement of legal, economic, and transparency standards in line with international practices.

Reference

1. OECD – Global Minimum Tax https://www.oecd.org/en/topics/global-minimum-tax

2. PwC Thailand – Corporate Tax Credits and Incentives https://taxsummaries.pwc.com/thailand/corporate/tax-credits-and-incentives

3. Thailand Aligns Investment Incentives with OECD Global Minimum Tax – 2026 Update https://mahanakornpartners.com/thailand-aligns-investment-incentives-with-oecd-global-minimum-tax-2026-update/

4. Reuters – Thailand to Implement Global Minimum Corporate Tax Rate https://www.reuters.com/markets/asia/thailand-implement-global-minimum-corporate-tax-rate-jan-1-2024-12-27/

5. Reuters – Thai Cabinet Approves Draft Law on Global Minimum Corporate Tax https://www.reuters.com/markets/asia/thailand-approves-draft-law-global-minimum-corporate-tax-sources-say-2024-12-11/

6. Nation Thailand – Anutin-led Panel to Fast-track Thailand’s OECD Bid by 2028 https://www.nationthailand.com/business/economy/40066407

7. BOI Reaffirms Continued Tax Incentives; Introduces New OECD-Aligned “Tax Credit” Scheme https://osos.boi.go.th/EN/news/2285/Unofficial-Translation-BOI-Reaffirms-Continued-Tax-Incenti/

8. Corporate income tax benefits. https://www.boi.go.th/index.php?language=en&page=procedures_cit_application&utm_source=chatgpt.com