The US Stance and the “Side-by-Side” Agreement

In response to this opposition and the threat of US retaliatory taxes, the US and G7 nations reached a “joint understanding” in June 2025. This agreement establishes a “side-by-side” solution, which effectively treats the existing US minimum tax regime on foreign income (GILTI) as functionally equivalent to Pillar Two. The key outcome is that US-parented MNEs are to be exempt from the Pillar Two Income Inclusion Rule (IIR) and UTPR that other countries have implemented.  

Impact on Thailand and Thai investors 

This US position has significant implications for both foreign investment in Thailand and Thai investment abroad: 

• For US MNEs investing in Thailand: The exemption for US-parented groups from the IIR and UTPR makes Thailand’s investment incentives particularly attractive to them. A US MNE benefiting from a BOI tax holiday or the 10% reduced rate will likely be shielded from having to pay a top-up tax to other jurisdictions. This preserves the full value of Thailand’s incentives for US investors, potentially making Thailand a more appealing destination for US capital compared to capital from countries fully subject to Pillar Two. 
• For Thai MNEs investing in the US: The situation is different for Thai-parented MNEs with operations in the United States. The US has not adopted Pillar Two or a Qualified Domestic Minimum Top-up Tax (QDMTT). While the US statutory corporate tax rate is 21%, various tax credits (e.g., for R&D or clean energy) can lower a company’s effective tax rate below the 15% minimum. If a US subsidiary of a Thai MNE has an ETR below 15%, the top-up tax would not be collected in the US. Instead, it would become payable by the parent company in Thailand under the IIR provisions of Thailand’s own Top-Up Tax Emergency Decree. Therefore, Thai investors must carefully assess the ETR of their US operations to anticipate potential tax liabilities at home.  

In essence, while Thailand has aligned itself with the global consensus by implementing Pillar Two, the significant carve-out for US-based companies creates a dual-track system. This may enhance Thailand’s attractiveness for US investment but requires Thai MNEs to remain vigilant about their own tax obligations arising from their US activities.