Recognition of Top-up Tax in the Q1 2025 financial statements

Who is affected? 

The decree applies to large multinational enterprises (MNEs) with: 

• global consolidated revenue of at least EUR 750 million in at least two of the four previous years; and  
• operations in Thailand functioning either as a Thai-headquartered MNE investing abroad or a foreign MNE investing in Thailand. 

The Emergency Decree introduces a top-up tax to ensure that these MNEs meet the global minimum tax rate. However, it does not provide specific details on several issues, including: 

• detailed top-up tax calculation mechanisms, such as adjustments to net income or loss for tax computation purposes; 
• conditions for tax exemptions or reductions (e.g., safe harbours); or 
• interaction with tax incentives, such as tax exemptions provided by the Board of Investment. 

These details will be outlined in secondary legislation, expected to be issued later in 2025. Despite this fact, TFAC has confirmed that companies must recognize top-up tax expenses in Q1 2025 based on existing regulations. 

TFAC’s guidance on recognizing Top-up Tax under TAS 12 

Under Paragraph 46 of TAS 12, income tax liabilities must be measured using laws enacted or substantively enacted by the end of the reporting period. Since the Emergency Decree has already been enacted, TFAC’s Q&A confirms the following: 

• Entities must estimate and recognize the top-up tax in their Q1 2025 financial statements. 
• Estimations should follow the OECD’s GloBE rules, as referenced in Section 23 of the Emergency Decree. 
• Entities should adjust tax amounts later if required by the final secondary legislation. 
• Entities should follow TAS 10 – Events after the reporting period (Paragraph 22.8) to determine if adjustments are required if the secondary legislation is enacted after the reporting date, but before the financial statements are approved. 

Important clarifications: Publicly accountable entities vs. Non-publicly accountable entities 

For publicly accountable entities that are required to submit Q1 financial statements, the Q&A applies immediately – top-up tax must be recognized in Q1 2025. 

For non-publicly accountable entities that voluntarily adopt TAS 12, while they should estimate top-up tax liabilities, there is no obligation to submit Q1 financial statements. The timing of recognition may follow internal group policy. 

Next steps & compliance actions 

• Evaluate exposure to top-up tax under the Emergency Decree 
• Estimate liabilities using OECD-aligned assumptions 
• Monitor updates from the Revenue Department and TFAC 
• Plan for potential tax and reporting adjustments once secondary laws are issued 

Conclusion 

The introduction of Thailand’s top-up tax under the Global Minimum Tax framework has significant financial reporting and tax compliance implications. Despite the fact that secondary legislation is still pending, TFAC has confirmed that companies must recognize the tax liability in their Q1 2025 financial statements under TAS 12. This is to prevent the under-recognition of tax obligations under the Emergency Decree. 

Affected entities – especially publicly accountable entities – should take prompt action to comply with TAS 12, while non-publicly accountable entities have more flexibility in the timing of recognition.  

References (in Thai): 

• Q&A: Accounting treatment of Top-up Tax under the Emergency Decree on Top-up Tax, B.E. 2567. Retrieved from Thailand Federation of Accounting Professions.  
• Emergency Decree on Top-up Tax, B.E. 2567. Retrieved from The Revenue Department of Thailand.