Thailand’s policy response to Pillar Two: BOI’s measures to sustain investment attractiveness

In response, Thailand has adopted a proactive approach, both by introducing the Emergency Decree on Top-Up Tax, B.E. 2567 (2024) and by revisiting its investment promotion framework through the Board of Investment (BOI). 

To help ease the transition, the BOI has launched interim measures that allow promoted companies to convert corporate income tax (CIT) exemptions into a reduced 10% CIT rate. This approach helps limit the GMT burden while retaining part of the tax revenue in Thailand. 

In the longer term, Thailand is shifting toward Pillar Two–compliant incentives. The BOI plans to introduce Qualified Refundable Tax Credits (QRTCs): a non-tax incentive mechanism funded by a portion of the top-up tax collected. This shift reflects a broader strategy to maintain Thailand’s competitiveness in a changing global tax environment. In this regard, the BOI recently conducted a public hearing on proposed amendments to the Act on National Competitiveness Enhancement for Targeted Industries B.E. 2560 (2017). The aim of the amendments is to establish a more structured framework for enhancing the competitiveness of targeted industries through a combination of financial incentives and regulatory improvements.  

Key provisions of the draft Act 

• There are three new terms introduced under Section 3 which include: 
  • Tax credit: The amount of tax credit which can be used to offset the tax amount in the period that is determined by the policy committee. 
  • Remaining tax credit: The amount of the tax credit remains after deducting the portion which is used to pay the tax and the policy’s participant may request a tax credit refund in cash within the period that determined by the policy committee. 
  • Tax credit refund: The policy committee approved the tax credit refund in cash of the remaining tax credit in the fund to the policy’s participant. 
• The committee is authorized to approve the fund distribution and Tax Credit Refund from the fund  
• The BOI will request information from the Ministry of Finance regarding the tax collection under the tax laws to evaluate the investment performance. 
• Investment and expenses related to R&D, innovation, and development of personalized specialization in the targeted industries are recognized as a Tax Credit which the promoted BOI company can utilize to offset against tax payable to the Revenue Department. Any fund received by the policy committee as stated under Section 26 shall not be included as a Tax Credit. 
• The Remaining Tax Credit may be requested to be refunded in cash from the funds under the rules and conditions set by the policy committee. 
• The policy committee has the right to revoke this entitlement of rights and benefits which resulted in the policy participant losing the Tax Credit for the accounting period that its rights and benefits have been revoked. Subsequently, tax laws will be applied 
• The policy committee is authorized to grant Tax Credit rights and benefits for investment expense incurred since 1 January 2025. 

Our observation 

The Thai economy significantly depends on foreign direct investment; therefore, the tax incentives offered by the Board of Investment (BOI) should be reassessed to ensure they remain appealing to foreign investors, particularly in light of compliance with the Pillar 2 guidelines established by the OECD.  

The introduction of the new tax credit scheme for BOI companies in Thailand can be compared with the QRTC scheme implemented in other countries, such as Singapore. This tax credit should be regarded as income, rather than a reduction in tax, in accordance with the Pillar 2’s GloBE rules, which will assist in maintaining a jurisdiction’s effective tax rate above the 15% threshold. Furthermore, the Tax Credit is eligible for a refund within a certain period of time. This treatment is noted for its compliance with Pillar 2, in contrast to traditional tax credits that lower covered taxes and could result in top-up taxes. 

This represents a strategic tool for Thailand to maintain its competitiveness while adhering to international tax standards. We advise the company engaged in a promoted business utilizing tax incentives in Thailand to closely monitor developments regarding this tax credit scheme, as it will significantly impact Pillar 2 when considering the Top-Up Tax for BOI companies.