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Updates to Thailand’s Investment Promotion Regime

Overview of Recent Amendments to Investment Promotion Measures in Thailand

Pursuant to the Investment Promotion Act B.E. 2520 (1977), as amended, Thailand has established a comprehensive framework and institutional mechanisms for promoting investment. The primary objectives are to create an investment-friendly environment, foster industrial development, and promote equitable income distribution by granting investment incentives to business activities deemed significant and prioritized.

In furtherance of these objectives, the Board of Investment (BOI) issued Notification of the Board of Investment No. 9/2565 regarding Measures for the Promotion of Industries Critical to National Development (“BOI Notification No. 9/2565“). This notification establishes the categories of business activities eligible for investment promotion, together with the applicable conditions, criteria, and privileges granted to promoted projects, as detailed in the Schedule of Investment-Promoted Activities annexed thereto.

To align with Thailand’s evolving economic development policies and strategic direction, accommodate the rapid expansion of industrial activities, and enhance incentives for investors, the BOI issued two notifications dated 5 June B.E. 2568 (2025), which were published in the Royal Gazette on 22 January B.E. 2569 (2026). These notifications revise and update the investment promotion framework to reflect current economic and industrial conditions by amending certain categories of business activities eligible for investment promotion as prescribed in the Schedule of Investment-Promoted Activities. The key amendments are summarized below:

1. Notification of the Board of Investment No. Sor. 5/2568

Amendment to the List of Activities Eligible for Investment Promotion under BOI Notification No. 9/2565

This notification is issued pursuant to BOI Notification No. 9/2565, which prescribes the categories of business activities and conditions eligible for investment promotion as set forth in the Schedule of Investment-Promoted Activities. Certain categories have been amended to focus on investments that create added value, promote the adoption of modern technologies in the manufacturing sector, enhance the development of supply chains to ensure Thailand’s export-oriented production attains international recognition and delivers maximum benefits, and accommodate the rapid expansion of data center businesses by supporting Thailand’s advancement toward becoming a digital hub of the ASEAN region.

This notification revises the categories of business activities and conditions eligible for investment promotion with respect to 32 categories under the Schedule of Investment-Promoted Activities. The majority of these are activities that generate added value for the national economy, including the machinery and automotive industry, electrical appliances and electronics industry, metals and materials industry, public utilities, digital industry, and creative industry. Additionally, investment promotion for metal cutting activities (Category 5.4.10) has been discontinued and removed from the list of promoted activities. This notification applies to business operators who submit applications for investment promotion on or after 1 July B.E. 2568 (2025).

2. Notification of the Board of Investment No. Sor. 6/2568

Investment Promotion Measures for Tourism-Related Businesses in Secondary Cities

The public sector has provided support for tourism development in secondary cities, which are provinces that are not widely known but possess high tourism potential. To promote tourism, distribute income equitably, and sustainably expand economic opportunities to local communities, investment promotion measures have been introduced for tourism-related businesses located in designated secondary cities.

This notification revises the criteria and conditions for investment promotion applicable to certain categories of tourism-related businesses (including cruise terminals, hotels, international exhibition centers, and similar establishments), totaling 12 items under the Schedule of Investment-Promoted Activities. The location of the establishment serves as a key criterion for granting enhanced and more beneficial investment promotion privileges, such as extended periods of corporate income tax exemption, to create incentives for both domestic and foreign investors to invest in secondary cities and extend investment promotion benefits to tourism businesses located therein. This notification applies to business operators who submit applications for investment promotion on or after 5 June B.E. 2568 (2025).

Key Observations

1. Discontinuation of Metal Cutting Activities (Category 5.4.10)

Business activities previously eligible for investment promotion under Category 5.4.10 (metal cutting activities) are no longer entitled to apply for BOI promotion, as the BOI has formally discontinued investment promotion for this category. Businesses operating in the affected sectors should conduct a careful review of their current operations to determine whether they may qualify under other eligible promoted activities. Where necessary, they should consider restructuring their investment structures or business operations to ensure ongoing compliance with the revised BOI investment promotion framework.

2. Enhanced Incentives for Tourism-Related Businesses in Secondary Cities

Tourism-related businesses located in secondary cities, whether newly established or existing, may have opportunities to receive investment promotion incentives at a higher level than previously available, including longer and more favorable tax incentives, which may serve as a catalyst for increased investment. Conversely, businesses located in primary cities may not be entitled to the same level of preferential treatment as those located in secondary cities, which may result in heightened competitive pressure regarding operational costs.

Status and Legal Effect

These two notifications are issued pursuant to Section 16 of the Investment Promotion Act B.E. 2520 (1977), as amended, and shall be applied in conjunction with the Investment Promotion Act B.E. 2520 (1977) and BOI Notification No. 9/2565. In the event of any inconsistency or conflict between the conditions or criteria, the provisions of these two notifications shall prevail and be applied on a case-by-case basis to the relevant promoted businesses, taking into account the prevailing economic circumstances at the relevant time.

Furthermore, additional or amending notifications concerning investment-promoted activities may be issued in the future to reflect Thailand’s evolving economic conditions. Investors are therefore advised to closely monitor regulatory developments in order to formulate, review, and adjust their investment strategies in a timely and appropriate manner.

Conclusion

These two BOI notifications constitute a significant component of Thailand’s current legal and policy framework governing investment promotion. They clearly reflect the government’s policy orientation toward enhancing national competitiveness, promoting targeted high-value industries, supporting regional economic development, and refining the investment promotion regime to ensure its alignment with rapidly evolving economic and technological landscapes.

Related Article: Thailand BOI Launches New SME Efficiency Enhancement Measures (Notification No. 5/2568) – The Legal Co., Ltd.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand BOI Launches New SME Efficiency Enhancement Measures (Notification No. 5/2568)

The Thailand Board of Investment (“BOI”) has issued BOI Notification No. 5/2568 Re: Measures to Enhance the Efficiency of Small and Medium-Sized Enterprises (“SMEs”), introducing a comprehensive incentive framework aimed at strengthening the competitiveness of SMEs. The measures are designed to encourage SMEs to modernize their operations through technological upgrades, enhanced operational efficiency, digital transformation, improved energy efficiency, and diversification into new industries.

This notification took effect on 5 June 2025 and applies to all investment promotion applications submitted on or after that date.

Purpose of the Measure

This measure aims to strengthen the resilience and long-term competitiveness of SMEs by promoting investments that enhance operational efficiency, elevate business practices to internationally recognized sustainability standards, and facilitate the transition into emerging industries. These initiatives are intended to enable SMEs to better align with global production requirements and environmental expectations.

Eligibility Requirements

To be eligible for the incentives under this measure, an applicant must satisfy all of the following conditions:

  • The company must have at least 51% Thai shareholding, and more than half of its authorized directors must be Thai nationals.
  • The company’s total revenue, calculated on a consolidated basis and inclusive of both BOI-promoted and non-promoted activities, must not exceed THB 500 million in aggregate over the preceding three fiscal years.
  • The company must be registered under the SME ONE ID system prior to the submission of the investment promotion application.

Conditions

The BOI permits existing SME projects to apply for incentives under this measure, subject to the following conditions:

  • This measure applies to existing SME projects, irrespective of whether they currently receive BOI investment promotion, provided that the project falls within an activity category eligible for promotion at the time of application. Projects classified under the BOI’s excluded activities or policies shall not be eligible.
  • Projects that have previously been granted BOI promotion may reapply under this measure upon the expiry of their existing corporate income tax (CIT) exemption or reduction period, or in cases where no CIT exemption was granted at the time of the original promotion.

Required Efficiency Improvement or Transition Activities

To be eligible under this measure, applicants must implement one or more of the following efficiency enhancement or business transition activities, subject to approval by the BOI:

  • Upgrading or replacing machinery and automation systems to enhance operational efficiency;
  • Adoption of digital technologies, including system integration software, artificial intelligence (AI), machine learning (ML), big data analytics, and electronic payment systems;
  • Upgrading production processes or operational systems to align with Industry 4.0 standards;
  • Improving energy efficiency or adopting renewable energy solutions within business operations;
  • Obtaining internationally recognized sustainability or quality certifications (e.g., GAP, FSC, PEFC, ISO 22000, ISO 14064); and
  • Transitioning business operations into new industries or activity categories eligible for BOI investment promotion.

1. Submission and Approval of the Investment Plan

  • Applicants are required to submit a comprehensive investment plan detailing the proposed improvement measures or transition activities.
  • Investment plans involving Industry 4.0 upgrades must be reviewed and approved by the National Science and Technology Development Agency (NSTDA).

2. Minimum Investment Requirement

  • The investment in efficiency improvement must be no less than THB 500,000, excluding the cost of land and working capital.

Rights and Benefits

Eligible SME projects are entitled to the following incentives:

  • Import duty exemption on machinery
  • Corporate income tax (CIT) exemption for up to five (5) years, equivalent to 100% of the qualifying investment amount (excluding land and working capital)
  • The CIT exemption period commences once the project generates revenue and must be utilized within three (3) years from the date of the promotion certificate.

Conclusion

BOI Notification No. 5/2568 represents a significant policy initiative to strengthen Thailand’s SME sector. By promoting modernization, digital transformation, energy efficiency, and sustainability, the measure supports SMEs in enhancing productivity and aligning with international standards.

Overall, the scheme is expected to accelerate the long-term competitiveness and resilience of SMEs while contributing to Thailand’s broader industrial transformation.

Author: Panisa Suwanmatajarn, Managing Partner.

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Strengthening Control over Illegal Foreign Employment in Thailand

Current Situation

Thailand continues to face significant challenges related to illegal migration and the unauthorized employment of foreign nationals. A substantial number of foreign nationals are estimated to have entered or remained in the Kingdom without valid immigration status or lawful work authorization, particularly in border areas. This situation raises serious concerns regarding national security, labor market integrity, and the protection of Thai workers’ rights.

In response, the Thai Government has reaffirmed its commitment to strict enforcement against illegal foreign employment. Relevant security agencies have been instructed to coordinate closely with provincial employment offices, especially in border provinces, to enhance surveillance, inspections, and preventive measures. Authorities have also been directed to conduct rigorous workplace inspections to ensure full compliance with applicable labor laws.

Legal Framework Governing Foreign Employment in Thailand

Under Thai law, foreign nationals must hold a valid work permit and perform only the work expressly authorized under that permit. Any violation of these requirements exposes both foreign workers and employers to significant legal penalties.

Liability of Foreign Workers

A foreign national who works in Thailand without a valid work permit, or who performs work beyond the permitted scope, is subject to:

  • A fine of THB 5,000 to THB 50,000;
  • Deportation to the country of origin; and
  • A two-year prohibition on applying for a new work permit from the date of punishment.

Liability of Employers and Business Owners

Employers or business owners who employ foreign nationals without a valid work permit, or permit foreign workers to perform work outside the permitted scope, shall be subject to:

  • A fine of THB 10,000 to THB 100,000 per foreign worker.

Enhanced Penalties for Repeat Offenses

In the event of repeat violations by employers, enhanced penalties apply, including:

  • Imprisonment for a term not exceeding one year; or
  • A fine of THB 50,000 to THB 200,000 per foreign worker; or
  • Both imprisonment and fine; and
  • A three-year prohibition on employing foreign workers.

Potential Impacts

Increased Legal Exposure for Foreign Nationals: Stricter inspections are likely to result in increased enforcement actions, including fines, deportation, and a two-year prohibition on obtaining a new work permit.

Heightened Compliance Obligations for Employers: Employers face greater legal and financial exposure, as fines are imposed on a per-worker basis, and repeat offenses may result in imprisonment, increased fines, and a three-year ban on employing foreign nationals.

Market and Workforce Implications: Industries that rely heavily on migrant labor may experience short-term labor shortages and higher compliance-related costs.

Strengthened Regulatory Enforcement and National Security: Enhanced coordination between security agencies and employment authorities is expected to improve enforcement efficiency, deter illegal employment, and promote standardized employment practices aimed at protecting Thai workers’ rights.

Conclusion

These measures are expected to strengthen the prevention and suppression of illegal foreign employment and promote greater legal compliance among employers. In the short term, businesses that rely heavily on foreign labor may face operational challenges, including labor shortages and increased compliance costs. In the long term, however, these measures are intended to enhance the protection of Thai workers’ rights and establish standardized employment practices consistent with internationally recognized labor standards.

Author: Panisa Suwanmatajarn, Managing Partner.

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White Collar Crime: Systematic Manipulation and Fraud in the Stock Case

A coordinated group of 42 individuals executed a sophisticated scheme to manipulate trading in shares of a listed company, causing significant losses to brokerage firms and eroding confidence in Thailand’s capital market. The Civil Court adjudicated the civil aspects under case numbers black F.11/2566 and red F.121/2568, concluding that the conduct amounted to joint fraud, operation as an unlawful association (analogous to a criminal syndicate), and market manipulation contrary to the Securities and Exchange Act B.E. 2535.

The group was structured into three subgroups: planners who devised the strategy, supporters who submitted buy orders via automated trading programs (BOT), and account holders who supplied login credentials (username and password) in exchange for a share of profits, typically allocated on a 70:30 basis. To obscure their involvement and circumvent regulatory reporting thresholds, the perpetrators employed Non-Voting Depository Receipts (NVDR)—a mechanism that allows foreign investors to hold economic exposure to Thai listed shares without direct ownership or voting rights—and dispersed orders simultaneously across multiple brokerage firms.

A decisive piece of evidence was the discovery that, despite the dispersal, all buy orders originated from the same IP address, demonstrating centralized control from a single computer or location. This technical linkage, combined with traceable financial flows showing profit-sharing transfers, established the concerted nature of the enterprise.

The scheme culminated on November 10, 2022, with the placement of At-The-Open (ATO) buy orders at 2.90 baht per share for approximately 1.532 billion shares, representing a value of more than 4.4 billion baht—over ten times the average daily trading volume in the preceding 30 days. These transactions utilized cash accounts, which permit settlement two business days later (T+2). When payment became due, the perpetrators deliberately defaulted, obliging the brokerage firms, acting as intermediaries, to cover the obligations to the clearing house in accordance with Stock Exchange of Thailand rules. The resulting aggregate loss to the brokerages reached approximately 4.5 billion baht.

The Anti-Money Laundering Office froze 36 related asset items valued at approximately 5.34 billion baht (including accrued interest) to prevent dissipation during legal proceedings.

The Civil Court divided the proceedings into three main categories:

•  Fraud: The court ordered restitution or compensation to 10–11 affected brokerage firms totaling approximately 4.5 billion baht and directed the forfeiture of approximately 1.5 billion shares to the state.

•  Unlawful association: Additional restitution of around 129 million baht to the brokerage firms.

•  Market manipulation: Civil penalties of approximately 226 million baht, payable to the state.

Separate criminal prosecutions remain ongoing, with indictments issued against multiple defendants and further investigative actions continuing as of early 2026.

Key Takeaways:

•  Deliberate exploitation of automated trading systems, deferred settlement rules, NVDR structures, and multi-brokerage order dispersal can inflict severe systemic damage on securities markets.

•  Unified technical indicators—such as a common IP address—and linked financial transactions remain essential in proving conspiracy notwithstanding attempts at concealment.

•  Effective inter-agency collaboration among investigative authorities, anti-money laundering offices, and market regulators is critical for asset preservation, victim compensation, and deterrence.

•  The incident underscores the necessity of heightened surveillance over high-volume automated orders, cross-brokerage patterns, proxy account usage, and NVDR transactions to protect market integrity and sustain investor confidence.

Related Article: White-Collar Crime: A Comprehensive Analysis of Characteristics, Investigation Techniques, and the Critical Role of Computer Forensics – The Legal Co., Ltd.

Author: Panisa Suwanmatajarn, Managing Partner.

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U.S. Multinationals and the OECD Pillar Two Framework: The Side-by-Side Safe Harbor

For decades, large multinational enterprises (MNEs) have minimized their global tax burden by allocating profits to subsidiaries in low-tax jurisdictions—commonly referred to as tax havens—despite conducting their principal operations and maintaining headquarters elsewhere. This practice has posed significant challenges for both source and market jurisdictions seeking to effectively tax profits generated within their borders.

To address this issue, the Organization for Economic Co-operation and Development (OECD) introduced the global minimum tax under Pillar Two as part of the Base Erosion and Profit Shifting (BEPS) 2.0 project. Pillar Two is designed to ensure that large MNEs are subject to a minimum effective tax rate of 15% in each jurisdiction where they operate. To date, more than 140 jurisdictions have committed in principle to adopt and implement this framework.

Recent developments demonstrate, however, that Pillar Two does not apply uniformly across all multinational groups. Following the January 5, 2026, OECD administrative guidance, multinational enterprises headquartered in the United States are now largely exempt from certain Pillar Two enforcement mechanisms through the Side-by-Side (SbS) Safe Harbor, significantly narrowing the scope and effectiveness of the global minimum tax.

Overview of the Pillar Two Framework

Under Pillar Two, when a subsidiary is subject to an effective tax rate below 15% in its operating jurisdiction, and that jurisdiction has not implemented a Qualified Domestic Minimum Top-up Tax (QDMTT), an additional “top-up tax” may be imposed by the jurisdiction of the Ultimate Parent Entity (UPE). The purpose of this top-up tax is to increase the overall effective tax rate on the subsidiary’s profits to the 15% minimum threshold.

Illustrative Example:

If a subsidiary located in Country A is taxed at an effective rate of 5%, the remaining 10% differential may be collected as a top-up tax by the jurisdiction in which the UPE is located, bringing the total effective rate to 15%.

The two primary mechanisms for collecting top-up taxes under Pillar Two are:

  1. Income Inclusion Rule (IIR): Allows the parent jurisdiction to impose top-up tax on low-taxed foreign income.
  2. Undertaxed Profits Rule (UTPR): Serves as a backstop mechanism, allowing other jurisdictions to collect top-up tax if the IIR is not applied. 

The U.S. Side-by-Side Safe Harbor

Although Pillar Two was designed as a globally coordinated tax framework, its implementation has diverged significantly in practice. On January 5, 2026, the OECD released administrative guidance establishing a Side-by-Side Safe Harbor, under which jurisdictions implementing Pillar Two will not impose IIR or UTPR top-up taxes on multinational groups headquartered in the United States.

The U.S. Department of the Treasury has articulated the rationale for this outcome based on several key policy considerations:

  1. Tax Sovereignty: The United States asserts its primary right to tax the worldwide income of U.S.-headquartered companies under its domestic tax system, including existing Global Intangible Low-Taxed Income (GILTI) provisions.
  2. Existing Domestic Minimum Tax Framework: The U.S. maintains that its current tax regime—including GILTI and domestic corporate taxation—already addresses the base erosion and profit-shifting concerns targeted by Pillar Two.
  3. Preservation of Tax Incentives: The safe harbor protects critical U.S. tax incentives, including research and development credits, which are viewed as essential for fostering domestic investment and innovation.

Scope of the Exemption

Under the SbS Safe Harbor, U.S.-headquartered MNE groups may elect to deem their top-up tax to be zero under both the IIR and UTPR across all worldwide operations, including foreign subsidiaries, joint ventures, and stateless entities. This election is available for fiscal years beginning on or after January 1, 2026.

Important Limitation: The SbS Safe Harbor does not exempt U.S. multinationals from Qualified Domestic Minimum Top-up Taxes (QDMTTs) imposed by foreign jurisdictions. Countries that have implemented QDMTTs retain the authority to collect minimum taxes on profits earned by U.S. companies within their borders.

As of the date of this analysis, the United States is the only jurisdiction formally recognized by the OECD as having a “Qualified SbS Regime” meeting the eligibility criteria set forth in the administrative guidance.

Implications of the Side-by-Side Safe Harbor

The establishment of the SbS Safe Harbor exempting U.S.-headquartered multinational groups from certain Pillar Two enforcement mechanisms gives rise to several significant implications:

1. Differential Application of the Global Minimum Tax

While Pillar Two remains in force across participating jurisdictions, it no longer applies uniformly to all multinational groups. The framework now operates on a bifurcated basis, with different rules applying to U.S.-parented versus non-U.S.-parented MNEs.

2. Limited Exposure for U.S.-Headquartered MNEs

U.S. multinationals are not subject to IIR or UTPR top-up taxes under Pillar Two, even where their effective tax rate in foreign jurisdictions falls below 15%. However, they remain subject to QDMTTs in jurisdictions that have enacted such measures.

3. Reduced Revenue Impact and Effectiveness

Given that a substantial number of the world’s largest MNEs are headquartered in the United States, the SbS Safe Harbor materially narrows the scope and potential revenue yield of the global minimum tax. The practical effectiveness of Pillar Two is consequently diminished relative to its original design.

4. Potential Competitive Imbalances

Non-U.S. multinational groups remain subject to the full application of Pillar Two, while U.S.-parented groups benefit from broad exemption from IIR and UTPR mechanisms. This asymmetry may create unequal competitive conditions in international markets and could influence investment and corporate structuring decisions.

5. Ongoing Monitoring and Review

The OECD has committed to conducting a comprehensive stocktake of the SbS system by 2029 to assess its impact on competitive balance, base erosion risks, and the broader integrity of the Pillar Two framework. This review may result in future modifications to the Side-by-Side arrangement.

Conclusion

The Pillar Two framework was conceived as a globally coordinated mechanism to establish a minimum effective tax rate of 15% and to curtail profit shifting to low-tax jurisdictions. The January 2026 administrative guidance introducing the Side-by-Side Safe Harbor demonstrates, however, that the framework is not applied consistently across all multinational groups in practice.

The exemption of U.S.-headquartered multinational enterprises from IIR and UTPR enforcement significantly limits the scope, revenue potential, and uniformity of the global minimum tax. As implemented, Pillar Two now functions as a partial rather than comprehensive mechanism of international tax coordination. While non-U.S. multinational groups remain exposed to potential top-up taxation under both the IIR and UTPR, U.S.-based groups continue to be governed primarily by U.S. domestic tax rules, resulting in differential treatment and potential competitive asymmetries in the international tax landscape.

The long-term implications of this bifurcated structure remain uncertain and will be subject to ongoing evaluation and potential adjustment as the OECD’s monitoring process unfolds through 2029.

Related Article: Advancing Thailand’s Legal and Regulatory Reform under the OECD Framework – The Legal Co., Ltd.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand’s New Import Duty Framework for Low-Value Goods: A Policy Shift Toward Competitive Neutrality

On 4 December 2025, the Thai Customs Department issued Customs Notification No. 219/2568 (2025), introducing significant reforms to Thailand’s import duty regime for low-value goods (LVGs). This measure eliminates the long-standing import duty exemption for LVGs as part of a broader policy initiative to address competitive imbalances between imported and domestically supplied goods and to restore tax neutrality in the Thai market. The Notification took effect on 1 January 2026 and remains in force until superseded by subsequent regulation.

Legal Background: Evolution of Import Duty Rules for LVGs

Historically, LVGs were exempt from import duty under Customs Notification No. 191/2561 (2018), which granted duty-free treatment for imported goods with a customs value not exceeding THB 1,500. This exemption was originally designed to reduce administrative burdens associated with customs clearance of small-value shipments.

However, the rapid expansion of cross-border e-commerce has resulted in LVGs being imported into Thailand on a substantial commercial scale, often in direct competition with domestically supplied goods. Over time, the exemption increasingly deviated from its original administrative rationale and raised concerns regarding fair competition and unequal tax treatment.

This measure was expressly temporary and applied only until 31 December 2024, after which the exemption regime reverted to the framework established under Notification No. 191/2561 (2018).

To establish a more sustainable policy framework, the Customs Department subsequently issued Customs Notification No. 219/2568 (2025), which formally repealed Customs Notification No. 191/2561 (2018). Consequently, the previous import duty exemption for LVGs has been fully revoked and is no longer in effect.

Current Import Duty Framework for LVGs

Under Customs Notification No. 219/2568 (2025), the following provisions now apply:

  • Imported goods with a customs value of less than THB 1 remain exempt from import duty.
  • Imported goods with a customs value of THB 1 or more are subject to import duty in accordance with the applicable tariff classification under Thailand’s customs tariff schedule.

Anticipated Benefits

  • Enhanced competitive equity: Domestic businesses, particularly small and medium-sized enterprises (SMEs), benefit from more equitable market conditions, as imported goods are now subject to import duty treatment comparable to locally supplied goods.
  • Improved tax neutrality: The revised framework reduces disparities in tax treatment between imported and domestically supplied goods, promoting a more level playing field.
  • Strengthened customs enforcement: These changes enhance customs oversight of large-scale commercial imports previously classified as low-value shipments, improving revenue collection and trade compliance.

Potential Challenges

  • Increased costs for cross-border sellers and consumers: Goods previously imported duty-free may now incur import duties, resulting in higher overall costs for end consumers and cross-border merchants.
  • Enhanced compliance obligations: Overseas sellers and e-commerce platforms face additional customs formalities and documentation requirements, potentially increasing operational complexity.
  • Administrative burden: The shift may require significant adjustments to existing logistics and compliance infrastructure.
  • Practical and Operational Implications
  • Pricing adjustments: Importers, logistics providers, and e-commerce platforms should revise their pricing structures to reflect increased exposure to import duties and maintain competitive positioning.
  • Process and system updates: Customs declarations, tariff classifications, and internal compliance systems require comprehensive review and updates to ensure alignment with the new regulatory framework.
  • Transitional considerations: Market participants may experience temporary operational adjustments and should implement appropriate change management procedures to facilitate smooth adaptation to the new regime.

Future Policy Considerations

In addition to the revised import duty framework, the Customs Department has indicated interest in simplifying the import duty structure for LVGs through the application of a single, uniform duty rate rather than multiple rates determined by product tariff classification. From a policy perspective, preliminary discussions suggest that collecting import duties on LVGs at an average rate of approximately 10% may be insufficient to achieve meaningful competitive balance. A higher rate—potentially in the range of 30%—has been discussed as more likely to establish parity between domestic and foreign businesses.

However, under the current caretaker government, the Customs Department lacks the authority to issue emergency decrees to amend the customs tariff schedule. Consequently, any modifications to duty rates or tariff structures will require legislative action following the formation of a new government.

Conclusion

The new import duty framework for low-value goods represents Thailand’s strategic policy response to the rapid growth of cross-border e-commerce and reflects a clear commitment to competitive fairness and tax neutrality. While these changes may result in increased costs and compliance obligations for certain overseas sellers and importers, they also strengthen customs enforcement capabilities and create more equitable conditions for domestic businesses.

Businesses engaged in importing goods into Thailand should conduct comprehensive reviews of their pricing strategies, customs classifications, and logistics and compliance processes to ensure ongoing adherence to the new regulatory framework. Early preparation and proactive adaptation will be essential to maintaining operational efficiency and market competitiveness under the revised regime.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand Issues Key Top-Up Tax Guidance: Exchange Rates, Exempt Entities, and Special Cases

Thailand enacted the Emergency Decree on Top-Up Tax B.E. 2567 (2024) (the “Emergency Decree“), which applies to large multinational enterprises (MNEs) whose total consolidated revenue, as reported in the consolidated financial statements of the ultimate parent entity (UPE), equals or exceeds EUR 750 million (or the Thai Baht equivalent). This legislation subjects in-scope MNEs to a top-up tax at a 15% global minimum tax rate for accounting periods commencing on or after 1 January B.E. 2568 (2025).

To support the implementation of the Emergency Decree with clarity and ensure practical enforceability, the Director-General of the Revenue Department issued three items of secondary legislation (the “Notifications“). These Notifications were issued on 24 December B.E. 2568 (2025) and published in the Royal Gazette on 13 January B.E. 2569 (2026). The Notifications apply for purposes of determining top-up tax liability for accounting periods commencing on or after 1 January B.E. 2568 (2025).

Key Provisions of the Secondary Legislation

1. Notification of the Director-General of the Revenue Department on Top-Up Tax (No. 6): Exchange Rate Conversion Standards

The top-up tax calculation is based on the financial information of MNE groups, which generally conduct operations using foreign currencies as their principal currencies. Consequently, establishing clear and standardized exchange rate rules is essential for accurate top-up tax computation.

This Notification prescribes exchange rate criteria for converting foreign currency amounts into Thai Baht under the Emergency Decree, ensuring consistency and uniformity in top-up tax calculations. The key provisions include:

Conversion for Tax Calculation Purposes

When the law prescribes criteria or conditions requiring consideration of figures from financial statements or calculation of top-up tax for an entity or group of entities stated in foreign currency, and such amounts must be converted to Thai Baht for a particular accounting period, the conversion shall utilize the average rate between the buying rate and selling rate for the month of December preceding that accounting period, as calculated by the Bank of Thailand.

Payment and Refund of Top-Up Tax

Regardless of which foreign currency is used as the principal currency in the operations of an entity or its group entities, any payment or refund of top-up tax in Thailand shall be made exclusively in Thai Baht. The conversion shall be calculated using the average rate between the buying rate and selling rate of commercial banks, as calculated by the Bank of Thailand on the last business day preceding either the date of tax payment or the date on which the competent authority approves the tax refund, unless otherwise exempted.

2. Notification of the Director-General of the Revenue Department on Top-Up Tax (No. 7): Excluded Entity Characteristics

Pursuant to Section 26 of the Emergency Decree, constituent entities (CEs) located in Thailand that are members of an MNE group whose total consolidated revenue, as reported in the consolidated financial statements of the UPE, equals or exceeds EUR 750 million (or the Thai Baht equivalent) for at least two accounting periods within the four accounting periods prior to the current accounting period, are subject to top-up tax.

However, Section 27 provides that certain categories of CEs are exempt from being treated as CEs subject to top-up tax. These exemptions apply to:

  1. Government agencies
  2. International organizations
  3. Non-profit organizations
  4. Pension funds
  5. Investment funds that are UPEs
  6. Real estate investment vehicles that are UPEs
  7. Other entities as may be prescribed by Royal Decree

To prevent overly broad interpretation of these exemptions, this Notification clearly and specifically prescribes the characteristics and qualifications of each entity type that does not constitute a CE, thereby establishing which entities fall outside the scope of top-up tax liability.

3. Notification of the Director-General of the Revenue Department on Top-Up Tax (No. 8): Special Calculation Rules for Entities with Specific Characteristics

This Notification prescribes specific criteria, procedures, and conditions for determining top-up tax liability applicable to CEs with the following characteristics:

  1. Constituent entities in which the UPE holds a minority interest
  2. Stateless constituent entities
  3. Investment entities, including insurance investment entities with liabilities arising from insurance contracts or life insurance annuity contracts

These entities possess legal forms, organizational structures, complex ownership structures, or operational modes that are distinct from other CEs, rendering the general rules under the Emergency Decree inappropriate for direct application. Accordingly, this Notification clearly prescribes specific methodologies and conditions for determining:

  • The scope of income
  • The aggregation of income
  • The allocation of profits or losses
  • Calculation methodologies

These provisions ensure that top-up tax collection is conducted accurately and fairly, properly reflecting the effective tax rate (ETR).

Separate Calculation Requirement

The calculation of ETR and top-up tax for CEs with these specific characteristics shall be conducted separately from other CEs within the MNE group. Furthermore, in certain cases, items and amounts included in the computation of ETR and top-up tax for entities with specific characteristics shall not be included in the computation of ETR and top-up tax for other CEs within the MNE group.

Legal Status and Hierarchy

These Notifications are issued pursuant to the authority granted under the Emergency Decree. They establish criteria and procedures for practical enforcement and support the implementation of the Emergency Decree. The Notifications apply consistently with the Emergency Decree, provided they do not conflict with other existing or future secondary legislation, such as Royal Decrees or Ministerial Regulations, which may be issued to prescribe further details in accordance with standards established by the Organization for Economic Co-operation and Development (OECD). Accordingly, stakeholders must continuously monitor further developments.

Key Considerations for Stakeholders

1. Application of Prescribed Exchange Rates

MNEs subject to top-up tax must apply the exchange rates prescribed under the relevant Notification when converting foreign currency amounts into Thai Baht to ensure uniform standards for tax computation. The amount of tax payable may vary based on prescribed exchange rates. However, such enterprises are afforded sufficient time to ascertain applicable criteria in advance of the accounting period commencement.

2. Documentation Requirements for Specific Constituent Entities

Constituent entities in which the UPE holds a minority interest, entities with complex ownership structures, stateless constituent entities, and investment entities whose ETR may not accurately reflect actual tax burdens must prepare comprehensive and detailed supporting documentation. Such information should include, but is not limited to:

  • Investment income details
  • Ownership and control structures
  • Asset management arrangements
  • Relevant financial statements

This documentation should support the assessment of whether top-up tax computation should be performed according to general rules or whether the application of specific rules, methodologies, or conditions prescribed by the relevant Notification is required.

Conclusion

The Emergency Decree has been designed to align with the OECD Global Anti-Base Erosion Rules. These Notifications are essential to demonstrate Thailand’s commitment to implementing top-up tax in accordance with OECD-prescribed standards while safeguarding Thailand’s rights and interests in top-up tax collection. Therefore, these Notifications should be considered and applied in conjunction with the Emergency Decree to enable CEs subject to top-up tax to calculate their obligations accurately and minimize interpretative gaps that could otherwise be exploited to avoid top-up tax liability.

Author: Panisa Suwanmatajarn, Managing Partner.

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Advancing the ASEAN Power Grid through LTMS-PIP Phase 2

The regional energy landscape has achieved a significant milestone with the execution of the Energy Wheeling Agreement (EWA) under Phase 2 of the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP Phase 2). This agreement involves the Electricity Generating Authority of Thailand (EGAT), Électricité du Laos (EDL), and Tenaga Nasional Berhad (TNB) of Malaysia, representing a sophisticated evolution in multilateral cross-border electricity trade within Southeast Asia.

The EWA represents a substantial advancement from the project’s inaugural phase, doubling the capacity for multilateral cross-border electricity commerce from 100 megawatts (MW) to 200 MW over a two-year period. This enhanced mechanism facilitates the transmission of electricity generated in Laos and Malaysia to Singapore, utilizing the existing grid infrastructure of Thailand and Malaysia as transmission corridors.

Transmission Framework

The Transmission Framework establishes the structural and operational parameters for cross-border power flows under LTMS-PIP Phase 2. It delineates institutional roles, capacity allocations, and operational protocols that enable coordinated electricity transfers across multiple jurisdictions.

Under LTMS-PIP Phase 2, the transmission framework operates through a multidirectional power trade arrangement:

  • Lao PDR Supply Stream: Up to 100 MW of renewable hydropower from Laos, transmitted through Thailand and Malaysia to Singapore
  • Malaysia Supply Stream: Up to 100 MW of electricity from Malaysia directly to Singapore

This integrated framework enables a total seamless transfer capacity of 200 MW, representing a robust commitment to regional energy integration and demonstrating the technical feasibility of multilateral power trade in ASEAN.

Strategic National Contributions

The success of LTMS-PIP transcends technical achievement, serving as a strategic blueprint for the ASEAN Power Grid (APG). Each participating nation fulfills a critical role in this collaborative energy framework:

Thailand (EGAT)

Serving as the primary wheeling partner, EGAT manages the transmission of power across Thai territory. This role positions Thailand’s transmission infrastructure as a cornerstone of the APG, facilitating regional grid integration and strengthening overall energy stability. Thailand’s participation generates revenue through wheeling charges while enhancing national energy security.

Laos (EDL)

As the renewable energy supplier, EDL reinforces its commitment to the APG by providing clean hydropower resources. LTMS-PIP Phase 2 expands Laos’ participation in the regional electricity market, promoting sustainable development objectives and positioning the nation as a key renewable energy exporter within ASEAN.

Malaysia (TNB)

As both a wheeling partner and electricity supplier, TNB plays a dual role in facilitating the framework while actively participating in regional power trade. TNB’s involvement supports Malaysia’s Ministry of Energy Transition and Water Transformation in building a resilient, interconnected ASEAN energy infrastructure, while generating export revenue and strengthening regional energy cooperation.

Conclusion

The successful integration of cross-border electricity trade among Thailand, Laos, and Malaysia under LTMS-PIP Phase 2 establishes a functional model for multilateral energy cooperation within ASEAN. By harmonizing technical standards and optimizing grid utilization through the EWA, the participating nations have progressed from bilateral trade arrangements to a sophisticated regional exchange mechanism.

This partnership not only maximizes existing infrastructure efficiency but also serves as the primary pathfinder project for the broader APG initiative. LTMS-PIP Phase 2 demonstrates that coordinated technical frameworks and sustained political commitment can successfully address the energy needs of multiple nations while advancing toward a sustainable, low-carbon future. The project’s achievements provide valuable insights and operational precedents for future multilateral power integration initiatives across the ASEAN region.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand’s Proposed VAT Increase: Legal and Policy Overview

Thailand is currently undertaking a comprehensive review of its long-term fiscal policy in response to rising public expenditure, persistent budget deficits, and the imperative to secure sustainable government revenue. For fiscal year B.E. 2569 (2026), the Ministry of Finance is preparing a broader tax structure reform plan to be submitted to the incoming government. A key element under consideration is a potential adjustment to the Value Added Tax (VAT) rate.

Background of Thailand’s VAT System

Thailand’s current VAT framework originated as an economic relief measure. In B.E. 2542 (1999), the government issued the Royal Decree Issued under the Revenue Code on the Reduction of the Value Added Tax Rate (No. 353) B.E. 2542 (1999), reducing the VAT rate from the statutory rate of 10% to 7% (comprising 6.3% VAT and 0.7% local tax). This measure was introduced during the Asian financial crisis, commonly referred to in Thailand as the “Tom Yum Kung” crisis.

Although originally intended as a temporary measure, the reduced VAT rate of 7% has been continuously extended through successive Royal Decrees for more than two decades and has remained a core feature of Thailand’s VAT system.

In recent years, the Ministry of Finance has expressed concern that the continued application of the reduced VAT rate may prove inadequate to meet Thailand’s future fiscal obligations, including expenditures related to infrastructure development, social welfare programs, and public debt servicing. Additionally, Thailand’s VAT rate remains comparatively low relative to those of many other jurisdictions.

The Ministry of Finance’s Proposed VAT Plan

Based on current policy discussions, the Ministry of Finance is considering a phased adjustment of the VAT rate rather than an immediate increase. The indicative timeline under consideration includes:

  • An increase in the VAT rate from 7% to 8.5% by 2028; and
  • A further increase to 10% by 2030.

Support Measures for Vulnerable Groups

To mitigate the potential social impact of a VAT increase, the Ministry of Finance has indicated that a portion of the additional revenue would be allocated to support vulnerable groups and alleviate cost-of-living pressures. By way of illustration, if VAT revenue were to increase by THB 100 billion, approximately THB 20 billion could be allocated to supplementary benefits under the State Welfare Card scheme, with the remaining amount applied to other cost-of-living support measures. These initiatives are intended to cushion the impact on low-income households in the event that a VAT adjustment is implemented.

Impacted Stakeholders and Economic Sectors

Any adjustment to Thailand’s VAT rate would have wide-ranging implications across multiple stakeholder groups and economic sectors.

Consumers – VAT is a consumption tax that is generally passed on to end consumers through higher prices for goods and services. Households, particularly low-income and fixed-income groups, are likely to experience the immediate impact through increased living costs. While certain essential goods and services may be zero-rated or exempt, they could still be indirectly affected through higher input costs.

Businesses and Operators – VAT-registered businesses would face higher output VAT obligations, which may affect pricing strategies, cash flow management, and compliance costs. Small and medium-sized enterprises (SMEs), in particular, may experience greater pressure if competitive constraints prevent them from fully passing on increased VAT to customers. Certain sectors, such as retail, hospitality, logistics, and consumer services, are expected to be more sensitive to VAT changes due to price elasticity and consumer behavior.

Government and Public Finance – For the government, a VAT increase would strengthen revenue collection and reduce reliance on borrowing. According to policy discussions led by the Ministry of Finance, any adjustment would be accompanied by targeted support measures for vulnerable groups to mitigate social impacts and maintain economic stability.

Current Status

At present, no legislative amendment or binding decision has been enacted. The VAT rate remains at 7% under the Royal Decree Issued under the Revenue Code on the Reduction of the Value Added Tax Rate (No. 799) B.E. 2568 (2025), which extends the reduced VAT rate until 30 September B.E. 2569 (2026). Any adjustment to the VAT rate will be conditional upon prevailing economic conditions. Accordingly, all impacted stakeholders and economic sectors should closely monitor ongoing developments to ensure timely awareness and compliance with any changes.

Conclusion

Thailand’s potential VAT reform reflects broader efforts to strengthen fiscal sustainability and secure long-term public revenue. While the reduced VAT rate remains in force and no legislative amendment has yet been enacted, policy discussions indicate a possible phased increase over the medium to long term. Any adjustment will depend on economic conditions and is likely to be implemented alongside mitigating measures to address social and economic impacts. In this context, businesses, taxpayers, and other affected sectors should closely monitor regulatory developments and assess potential implications for pricing, compliance obligations, and overall cost structures should the proposed reform proceed.

Author: Panisa Suwanmatajarn, Managing Partner.

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BOI Unveils Draft National Semiconductor Roadmap Aiming to Attract Over 2.5 Trillion Baht in Investments

The Board of Investment (BOI) has presented the draft National Strategy for the Development of the Semiconductor and Advanced Electronics Industry to the National Semiconductor and Advanced Electronics Policy Committee. This comprehensive roadmap, prepared since April 2025 with the assistance of a leading global consulting firm, outlines a long-term vision to position Thailand as a leading hub for semiconductor production in the region.

The strategy builds upon Thailand’s existing strengths in downstream activities, such as outsourced semiconductor assembly and testing (OSAT) and integrated circuit design, while advancing capabilities across the full value chain—from upstream wafer fabrication to high-value design and production. The ultimate objective is to achieve “Made-in-Thailand Chips” by 2050, fostering a complete and integrated semiconductor ecosystem.

Strategic Focus and Targets:

The roadmap targets investments exceeding 2.5 trillion baht over the 25-year period from 2026 to 2050. It also aims to develop more than 230,000 highly skilled personnel to support industry growth.

Emphasis is placed on five product categories where Thailand demonstrates strong potential and alignment with domestic industries:

•  Power chips

•  Sensor chips

•  Photonics chips

•  Analog chips

•  Discrete chips

These segments are closely linked to key sectors including automotive, electronics, telecommunications, data centers, artificial intelligence, automation, and medical applications.

Phased Development Approach:

In the initial five-year phase (2026–2030), efforts will concentrate on leveraging current advantages in OSAT, IC design, and advanced electronics, while initiating investments in wafer fabrication and nurturing domestic enterprises to emerge as leading players. Subsequent phases will progressively expand the value chain toward full self-reliance in high-value production.

Five Key Driving Mechanisms:

To realize these ambitions, the strategy proposes action across five critical areas:

1.  Investment Incentives — Provision of financial support, including grants and long-term low-interest loans, to attract priority projects.

2.  Human Capital Development — Establishment of specialized curricula, industry-academia collaborations (both domestic and international), and vocational training programs to build expertise in semiconductor engineering and advanced research.

3.  Technology Advancement — Upgrading national research centers and fostering partnerships among government, private sector, and academic institutions for research and development.

4.  Infrastructure Enhancement — Development of dedicated clusters, reliable utilities (including clean energy), water systems, and robust disaster management capabilities.

5.  Business Environment Improvement — Streamlining approvals and permits, negotiating international trade agreements, and implementing government procurement mechanisms to support local enterprises.

Competitive Positioning and Supporting Context:

Although, Thailand’s semiconductor industry remains in its early stages compared to regional leaders such as Singapore and Malaysia, or competitors including Vietnam and the Philippines, the country possesses competitive advantages in infrastructure, workforce quality, business environment, and downstream industries.

From 2018 to November 2025, the electrical and electronics sector attracted 1,748 investment promotion applications totaling 1.17 trillion baht, representing 19% of all promoted investments and underscoring its status as the leading sector. The global semiconductor market is projected to reach 1 trillion U.S. dollars by 2030, presenting significant opportunities for strategic growth.

Key Takeaways:

•  Thailand’s national semiconductor roadmap targets over 2.5 trillion baht in investments and the development of more than 230,000 skilled professionals by 2050.

•  Focus is directed toward five high-potential chip categories that align with the country’s established industrial strengths.

•  A five-pillar approach addresses incentives, talent, technology, infrastructure, and business facilitation to build a complete ecosystem.

•  The strategy emphasizes transitioning from assembly-focused activities to high-value design and fabrication, aiming for “Made-in-Thailand Chips” and regional leadership in the sector.

•  This initiative positions the semiconductor industry as a key driver of long-term economic competitiveness amid rapid global technological and supply chain evolution.

Author: Panisa Suwanmatajarn, Managing Partner.

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