The Emergency Decree on Top-up Tax B.E. 2567 (2024) has been promulgated and the first accounting periods to which it applies have already commenced, yet the detailed implementing regulations have been slow to appear. That said, Section 58 of the Decree extends the filing and payment deadlines for the first accounting period subject to top-up tax to 18 months from the respective dates specified in the relevant provisions. For example, where a Japanese parent company has a 31 March fiscal year-end and the Thai constituent entity has a 31 December year-end, the first filing and payment deadline would be 30 September 2027 — so, in a sense, it is still some way off.
Among the pending detailed rules, the one attracting the most attention is likely the “Qualified Refundable Tax Credit (QRTC).” As is well known, the top-up tax regime applies to multinational enterprise (MNE) groups with annual consolidated group revenue of at least EUR 750 million. Most Japanese-affiliated constituent entities in Thailand belonging to such MNE groups are likely to be manufacturers operating under BOI tax exemption or reduction incentives, so the design of the QRTC is likely to be of the greatest interest to them. This is because, in some cases, the QRTC could work more favorably for a company than BOI tax exemptions.
The Thai government initially appears to have planned to introduce the QRTC by amending the Act on Enhancement of National Competitiveness for Targeted Industries B.E. 2560 (2017) and entrusting its administration to the BOI. Recently, however, it seems increasingly likely that it will instead enact a new, stand-alone QRTC Act with its administration entrusted to the Revenue Department.
In this context, the Revenue Department has released its draft proposal and invited public comments, and our firm submitted written comments in response. The main points are as follows.
Arguably the foremost requirement that allows a QRTC to be treated in a manner comparable to a subsidy is that the credit be refunded in cash to the claimant within four years after the eligibility requirements have been met. However, the draft provisions are complex, and there is concern that the draft does not sufficiently ensure compliance with this requirement. The QRTC regime has a feature rarely found in ordinary legislation: it is not merely a matter of Thai domestic law, but a regime that necessarily interacts with the tax systems of other countries. Provisions so complex that their application lacks predictability should therefore be avoided; what is needed are clear provisions that other countries and investors can easily understand. For better or worse, under the influence of globalism, it should be borne in mind that even in matters of taxation a country cannot simply invoke its sovereign power of taxation (tax sovereignty) without regard to the international framework. Put the other way round, legislating the QRTC regime is an ideal opportunity for Thailand to demonstrate widely to the international community that it is a country committed to the rule of law. Furthermore, as a matter of administrative practice, consideration should be given to allocating an adequate budget to the Revenue Department to recruit the personnel needed to administer the regime properly.