Tag: Legal Updates

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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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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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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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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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Online Platform: ETDA’s Push for New Rules on Social Commerce to Safeguard Thai Consumers

In a move to tighten oversight on digital marketplaces, Thailand’s Electronic Transactions Development Agency (ETDA) is gearing up to introduce new regulations targeting social commerce platforms. This initiative aims to close loopholes in consumer protection, ensuring that online transactions meet stringent standards amid the growing popularity of buying and selling via social media. The announcement comes as platforms like Facebook argue they fall outside traditional e-commerce definitions, prompting ETDA to expand its regulatory net.

The backdrop for these changes is rooted in Thailand’s evolving digital economy. With e-commerce booming, the existing Electronic Transactions Committee’s announcement—set to take effect on December 31, 2025—already mandates that e-commerce platforms sell or advertise products adhering to standards from the Thai Industrial Standards Institute (TISI) and the Food and Drug Administration (FDA). However, social media giants such as Facebook have claimed exemption, citing the absence of integrated payment systems and separate user accounts for transactions. ETDA has countered this, stating, “Facebook has informed ETDA that they do not fall under the category. We are therefore preparing a new announcement to cover Facebook, as it cannot be denied that Facebook is widely used as a platform for buying and selling goods known as social commerce, which requires strict product standards.”

This conciliatory approach by ETDA also considers international trade dynamics, particularly U.S. policies under President Donald Trump, which threaten trade retaliation against countries restricting American platforms. By avoiding overly restrictive measures, Thailand seeks to balance consumer safety with open trade, preventing potential barriers for U.S.-based companies operating in the region.

Beyond social commerce, the new rules will extend to space-sharing platforms like Airbnb. ETDA plans to enforce standards for user safety, identity verification, and tenant rights, addressing common issues such as leaks or power outages. Additionally, concerns over monopolistic practices in delivery services—previously requiring platforms to offer at least three shipping options—have been shifted to the Trade Competition Commission (TCC) for handling and streamlining regulatory responsibilities.

These developments underscore Thailand’s commitment to fostering a secure digital ecosystem. As social commerce continues to thrive, with platforms blending social interaction and shopping, the need for robust oversight has become evident. ETDA’s efforts aim not only to protect consumers from substandard or unsafe products but also to promote fair competition and innovation in the online space.

Key Takeaways:

Future Implications: This could set a precedent for more comprehensive digital platform governance in Thailand, boosting trust in online transactions.

Expanded Regulation: ETDA’s new announcement will include social commerce platforms like Facebook, requiring them to enforce product standards from TISI and the FDA to plug consumer protection gaps.

Consumer Focus: The rules prioritize Thai buyers’ safety by mandating quality controls on goods sold online, effective from late 2025 onward.

International Considerations: A balanced approach avoids trade conflicts with the U.S., aligning with global digital trade norms.

Broader Scope: Space-sharing services like Airbnb will face new safety and rights standards, while delivery monopolies fall under TCC jurisdiction.

Author: Panisa Suwanmatajarn, Managing Partner.

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Updated Regulation on Official Secrets: Modernization, Electronic Security Measures, and Comparison with International Standards

On 30 December 2025, the Thai Cabinet approved in principle the draft Regulation on the Protection of Official Secrets (No. ..) B.E. …., as proposed by the Office of the Permanent Secretary to the Prime Minister. This revision updates the framework established in B.E. 2544 (2001), primarily to address the increasing reliance on electronic systems in government operations and resolve limitations in handling classified information digitally.

Background and Rationale:

The original regulation, enacted pursuant to Section 16 of the Official Information Act, B.E. 2540 (1997), mandated measures to prevent leakage of official secrets. It detailed procedures for classification, copying, translation, transfer, transmission, disclosure, destruction, storage, backup, and security, but focused predominantly on paper-based documents.

With the widespread adoption of electronic systems, agencies faced operational delays when handling classified information, often reverting to paper methods for compliance. This practice conflicted with the Prime Minister’s Office Regulation on Administrative Correspondence (No. 4), B.E. 2564 (2021), which promotes electronic administration.

The need for reform was identified as early as the Official Information Board No. 2/2554 meeting in March 2011, leading to the formation of a sub-committee. The revised draft, endorsed by the Board in its no. 2/2568 meeting on 28 October 2025, was subsequently submitted to the Cabinet.

Key Amendments: Electronic Classified Information

The primary enhancement is the introduction of Chapter 5: Electronic Classified Information, comprising 26 new provisions (Sections 50/1 to 50/26). These establish comprehensive guidelines for digital management of classified data, covering:

•  Classification and marking of electronic documents.

•  Procedures for creation, copying, translation, transfer, transmission, receipt, and disclosure via digital channels.

•  Secure storage, backup, and recovery to mitigate loss or unauthorised destruction.

•  Cybersecurity measures, including encryption, access controls, and system auditing.

•  Protocols for secure destruction of electronic classified information when no longer needed.

These provisions aim to facilitate efficient inter-agency coordination and public service delivery while preserving confidentiality.

Expected Benefits:

By providing clear protocols for electronic transmission, the regulation enhances administrative speed and aligns secrecy practices with modern information technology. It supports digital transformation in public administration without compromising national security or obligations under the Official Information Act, B.E. 2540 (1997).

Next Steps:

The Cabinet has directed submission of the draft to the Committee for the Scrutiny of Draft Legislation and Subordinate Legislation Proposed to the Cabinet. This review will incorporate observations from entities such as the Office of the Public Sector Development Commission, the Office of the Council of State, the Digital Government Development Agency, the National Economic and Social Development Council, and the National Security Council. Formal promulgation will follow upon completion.

Comparison with International Standards:

Thailand’s revisions demonstrate strong alignment with global best practices in electronic handling of classified information, which universally emphasize encryption, access controls, auditing, and secure storage.

•  United States: Executive Order 13526 and NIST SP 800-53 Revision 5 offer detailed, risk-based controls across multiple families (e.g., Access Control, System and Communications Protection). Thailand’s provisions mirror these in core areas but are less granular.

•  European Union: Council Decision 2013/488/EU requires approved cryptography for higher classifications and comprehensive information assurance. Thailand parallels this in transmission and storage requirements.

•  United Kingdom: The Official Secrets Act 1989 (as amended) and related policies incorporate encryption and secure systems, with recent enhancements under the National Security Act 2023 addressing contemporary threats.

•  ISO/IEC 27001: This standard mandates risk-based information classification and controls for transfer and protection. Thailand’s government-specific rules complement this approach.

Similarities include mandates for encrypted transmission, restricted access, secure storage, and audited destruction. Differences lie in depth: international frameworks like NIST provide extensive, customizable controls and certification requirements, whereas Thailand’s update remains procedurally focused on administrative adaptation.

Overall, this reform represents a commendable advancement toward international convergence, bolstering Thailand’s digital governance while upholding robust confidentiality safeguards. Further enhancements could involve adopting more detailed risk-based mechanisms and independent certification processes observed in mature systems.

Author: Panisa Suwanmatajarn, Managing Partner.

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In-Principle Cabinet Approval of Thailand’s 2025 Permanent Residence Quota: Strengthening Long-Term Investment Confidence

The Thai Cabinet has granted in-principle approval to the Draft Notification of the Office of the Prime Minister and the Ministry of Interior on the Determination of the Annual Quota of Foreign Nationals Eligible for Permanent Residence in Thailand for B.E. 2568 (2025), as proposed by the Ministry of Interior. This development holds particular significance for the business and investment communities, as it enhances regulatory certainty for foreign investors seeking long-term stability and lawful residence in Thailand, especially given the substantial contribution of foreign investment to the Thai economy.

While Section 40 of the Immigration Act B.E. 2522 (1979) prescribes the maximum number of foreign nationals eligible for permanent residence, this provision merely establishes a statutory ceiling. A separate annual notification is required to formally determine and activate the quota for each calendar year, thereby enabling lawful approvals under Section 41 of the Immigration Act B.E. 2522 (1979).

Annual Quota for Permanent Residence for B.E. 2568 (2025)

  • Up to 100 persons per nationality
  • Colonies of any country, or territories with autonomous administration, shall be treated collectively as one nationality
  • Up to 50 stateless persons

Key Implications for Business and Investment Sectors

1. Annual Quota Determination Process
The permanent residence quota is determined annually based on prevailing demand, subject to the statutory maximum prescribed under Section 40 of the Immigration Act B.E. 2522 (1979).

2. Enhanced Strategic Workforce Planning
Clearly defined annual quotas enable businesses to plan immigration strategies for foreign employees and key personnel more effectively and with greater foresight.

3. Workforce Stability and Talent Retention
A structured pathway to permanent residence facilitates the retention of qualified foreign professionals and minimizes immigration-related operational disruptions.

4. Investment Confidence and Risk Mitigation
Cabinet-level approval of the annual quota reinforces regulatory legitimacy and reduces uncertainty for investors making long-term capital commitments in Thailand.

5. Economic Ecosystem Development
Strengthening Thailand’s appeal as a long-term destination for foreign nationals indirectly supports ancillary sectors including real estate, education, healthcare, and lifestyle industries.

Conclusion

Thailand’s annual permanent residence quota operates within a structured statutory framework under the Immigration Act B.E. 2522 (1979), providing regulatory clarity and predictability for foreign nationals, businesses, and investors seeking long-term establishment in the Kingdom. This systematic approach strengthens investor confidence and reinforces Thailand’s position as a regional hub for sustained investment and high-skilled talent acquisition.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand’s Top-up Tax Regime: Aligning Domestic Law with OECD Global Minimum Tax Standards

Overview of Thailand’s Top-up Tax Regime

Following the enactment of the Emergency Decree on Top-up Tax, B.E. 2567 (2024) (the “Emergency Decree“), Thailand has established a global minimum tax regime aligned with international tax reform initiatives. The Emergency Decree applies to large multinational enterprise groups (MNEs) with consolidated financial statement revenues of at least EUR 750 million (or the Thai Baht equivalent).

Under the Emergency Decree, in-scope MNEs are subject to a 15% global minimum effective tax rate on their profits through the imposition of a top-up tax. This mechanism ensures that profits are taxed at a minimum level, regardless of the jurisdiction in which they are earned. The Emergency Decree took effect for accounting periods commencing on or after 1 January B.E. 2568 (2025), marking a significant development in Thailand’s international tax framework and its alignment with the global minimum tax standards endorsed by the Organisation for Economic Co-operation and Development (OECD).

Draft Secondary Legislation

On 30 December B.E. 2568 (2025), the Cabinet approved in principle four draft items of secondary legislation (the “Draft Secondary Legislation“) issued pursuant to the Emergency Decree. The Draft Secondary Legislation sets out detailed rules governing the determination of multinational enterprise groups subject to the top-up tax and the adjustment of income, expenses, and covered taxes for calculating the top-up tax.

The Draft Secondary Legislation has been developed with reference to the Global Anti-Base Erosion (GloBE) Model Rules, the related Commentary, and the Administrative Guidance issued by the OECD. The four draft items of secondary legislation are as follows:

  1. Draft Royal Decree prescribing the criteria for determining the applicability of the top-up tax to multinational enterprise groups that have undergone organizational restructuring, B.E. ….;
  2. Draft Royal Decree prescribing entities that are not regarded as constituent entities, B.E. ….;
  3. Draft Ministerial Regulation No. .. (B.E. ….), issued pursuant to the Emergency Decree, concerning the allocation of residual top-up tax received by Thailand to constituent entities located in Thailand; and
  4. Draft Ministerial Regulation No. .. (B.E. ….), issued pursuant to the Emergency Decree, concerning adjustments to income, expenses, and covered taxes for calculating the top-up tax.

Applicable Stakeholders to the Emergency Decree and Draft Secondary Legislation

Scope of Application

The Emergency Decree, together with the Draft Secondary Legislation, applies to all constituent entities (CEs) located in Thailand that are members of an MNE group whose ultimate parent entity has consolidated revenues equal to or exceeding EUR 750 million (or the Thai Baht equivalent) in at least two of the four preceding fiscal years.

Organizational Restructuring

MNEs should plan in advance for organizational restructuring activities, including mergers and acquisitions, demergers, and intra-group transfers of assets, as such restructuring arrangements cannot be used to circumvent the top-up tax.

Investment Promotion Incentives

MNEs that have received investment promotion incentives from the Thailand Board of Investment (BOI) are exempt from corporate income tax (CIT); however, such incentives do not exempt them from the top-up tax. Where the effective tax rate falls below 15%, the relevant MNEs are required to pay top-up tax to reach the global minimum effective tax rate.

Tax Planning Requirements

Advance tax planning is essential. Where an MNE has CEs in Thailand, the effective tax rate of each CE should be carefully assessed. Even where the effective tax rate (ETR) exceeds 15% and no top-up tax is payable, GloBE information reporting obligations continue to apply. To ensure compliance with the OECD GloBE Rules, MNEs are advised to consult financial and tax advisors to maintain accurate accounting and tax information.

Reporting and Filing Obligations

All CEs in Thailand are required to electronically submit the following documents to the Thai Revenue Department within 15 months from the end of the relevant accounting period in which the top-up tax is assessed:

  • Notification reporting information relating to the MNE group, details of the constituent entity, and the jurisdiction in which it is located;
  • The GloBE Information Return; and
  • The top-up tax return, together with the payment of the corresponding tax.

Next Steps

The Draft Secondary Legislation issued pursuant to the Emergency Decree is currently undergoing the process for publication in the Royal Gazette. Once officially published, it will become enforceable as secondary legislation, marking the next stage in the implementation of Thailand’s top-up tax regime.

Conclusion

The Emergency Decree and the Draft Secondary Legislation ensure that Thailand’s top-up tax framework is fully aligned with the practices adopted by members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). This approach is expected to significantly reduce base erosion and profit shifting by MNEs at both domestic and international levels while curbing competitive disparities in corporate income taxation. Moreover, it is anticipated to promote sustainable investment in Thailand, balancing fiscal sustainability with a competitive investment environment.

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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Cannabis: Stricter Controls with New Draft Ministerial Regulation

The Ministry of Public Health (MOPH) is progressing with a new draft ministerial regulation to impose tighter oversight on cannabis, prioritizing medical applications and consumer safeguards amid a notable decline in commercial outlets.

The draft, titled “Ministerial Regulation on Permits for Research, Export, Sale, or Processing of Controlled Herbs for Commercial Purposes (No. .. ) B.E. ….”, has received Cabinet approval and is undergoing review by the Office of the Council of State prior to final approval.

This update replaces the 2016 regulation, which is deemed insufficient for the evolving cannabis landscape. It introduces targeted mechanisms for commercial export, sale, and processing to safeguard public health and minimize community disruptions.

Principal Requirements Under the Draft Regulation:

•  Restricted Sales Venues: Commercial distribution limited to medical treatment facilities (with physician prescriptions and supervised dispensing), pharmacies, herbal product outlets, or traditional Thai medicine practitioner sites.

•  Staffing Standards: At least one employee certified by the Department of Thai Traditional and Alternative Medicine must be on duty during business hours.

•  Operational Guidelines: Mandatory efficient systems for odor and smoke elimination to avoid public nuisance; premises must be legally owned or possessed; dedicated storage with controlled temperature, humidity, separation from other items, and no direct floor contact.

•  Transitional Provisions: Current licenses are valid until expiry, but all renewals, new permits, or pre-enactment applications must adhere to the updated standards.

The MOPH has affirmed sufficient qualified medical professionals nationwide to support the framework and guaranteed uninterrupted access for patients requiring cannabis therapeutically through hospital-based prescriptions.

Recent data indicate substantial industry contraction: As of late 2025, 18,433 registered establishments existed nationwide, 8,636 expiring licenses in 2025, only 1,339 (15.5%) were renewed, resulting in over 7,297 closures and an estimated 11,136 remaining. Further expirations are anticipated: 4,587 in 2026 and 5,210 in 2027.

Many operators appear to be closing in anticipation of the elevated compliance thresholds rather than adapting.

Key Takeaways:

•  Medical-Centric Shift: Sales confined to regulated health-related venues, emphasizing prescription-based access over general retail.

•  Mandatory Business Upgrades: Requirements for infrastructure, storage, environmental controls, and trained personnel will challenge existing operators.

•  Industry Downsizing: Thousands of outlets have already closed without renewal, foreshadowing further consolidation.

•  Patient Protections: Therapeutic users assured continued supply via national hospital networks.

•  Implementation Timeline: Final enactment expected soon after review; broader policy direction may vary with future administrations.

Author: Panisa Suwanmatajarn, Managing Partner.

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