Tax reform efforts threaten investment

Global push could affect Thai tax incentives

Attempts by major economies to overhaul the global tax system could fight corporate tax evasion, but could also have an impact on Thai tax incentives granted by the Board of Investment (BoI), said the director general of the tax department. income, Ekniti Nitithanprapas.

Members of the G20 and the Organization for Economic Co-operation and Development (OECD) are discussing a plan to reform the global tax system through two key methods.

We would see multinational companies, when they invest in a country without being based there, pay part of their profits to that country if they generate revenues of more than 20 billion euros (763.9 billion baht) on it. territory.

Mr. Ekniti said Thailand stands to gain from this first method.

The second method targets parent companies that create subsidiaries in tax havens to benefit from lower tax rates.

If this method were agreed, the country where the parent company is present would be able to collect from it an additional tax in addition to the tax paid by its subsidiaries in the tax haven.

The cumulative surtax of parent companies and the tax paid by their subsidiaries in tax havens must not be less than 15%.

To give an example, Company A creates a subsidiary in a tax haven. If its subsidiary pays 10% tax in Paradise, the country that hosts Company A has the power to levy an additional 5% tax.

Mr Ekniti said this method could affect the BoI’s incentives. For example, if a Japanese company wants to invest in Thailand to benefit from 0% tax incentives, it will have to pay an additional 15% tax in Japan, which could make Thailand less attractive.

Mr. Ekniti added that Thailand is negotiating the details of this issue with the G20 and the OECD.

Thailand continued to reorganize its tax system. One example is its launch last September of the Electronic Services Tax Act to collect value added tax (VAT) from foreign operators of revenue-generating electronic services in Thailand.

This law requires foreign companies providing online services in Thailand to register for 7% VAT if their annual income exceeds 1.8 million baht.

The finance ministry plans to collect VAT of 10 billion baht per year on these platforms, against a previous estimate of 5 billion baht.