Thailand’s Revenue Department and the Thai government are currently in the process of drafting new tax regulations and reviewing existing Double Taxation Agreements (DTAs) in preparation for adopting the Subject to Tax Rule Multilateral Instrument (STTR MLI) under the OECD Pillar Two framework.
Herrera and Partners (H&P) Tax and Accounting department have prepared a summary of what will be next in 2026 in term of tax law in Thailand.
The STTR MLI introduces a minimum tax rate of 9% on certain cross-border payments between related companies. This development marks a major change in Thailand international tax rules, especially for businesses that currently benefit from tax exemptions under DTAs.
Why Thailand Is Implementing the STTR MLI
Under several existing Thailand DTAs, certain payments between related parties—such as interest, royalties, or service fees—are either exempt from withholding tax or taxed at a rate lower than 9%. As a result, the Thai Revenue Department is unable to collect sufficient tax on these cross-border transactions.
The purpose of the STTR MLI Thailand implementation is to strengthen Thailand’s taxing rights by allowing the government to impose a top-up tax when income is not adequately taxed in the recipient’s jurisdiction. This aligns Thailand with global efforts to prevent base erosion and profit shifting (BEPS).
Thailand Double Taxation Agreements and the 9% Minimum Tax Rule
At present, Thailand has 61 Double Taxation Agreements with 61 countries. Among these, 26 DTAs provide withholding tax rates that are lower than the 9% STTR threshold
Once the STTR MLI becomes effective, Thailand will be entitled to collect additional STTR tax to ensure that the effective tax rate on qualifying payments reaches at least 9%.
This change will significantly affect international tax planning in Thailand, particularly for multinational groups operating under preferential tax regimes.
Key Conditions for STTR MLI Transactions in Thailand
To determine whether a transaction falls under the STTR tax rule, the following conditions must be met:
- Recipient’s Corporate Income Tax Rate
The recipient company must be subject to a corporate income tax rate below 9% in its home jurisdiction.
- Thailand Withholding Tax Rate under DTA
The applicable withholding tax rate in Thailand, as specified by the DTA, must also be less than 9%.
- STTR Tax Rate Calculation
The STTR tax is calculated as a top-up tax to bridge the gap between the applicable rate and the 9% minimum.
- Related Party (Connected Person) Requirement
The transaction must occur between related parties, where one entity holds more than 50% shareholding, either directly or indirectly.
- Nature of the Transaction
Only specified types of income, such as interest, royalties, management fees, or service fees, fall within the STTR scope.
- Mark-Up Threshold
The transaction must exceed a mark-up threshold of 8.5%, as required under the STTR MLI.
- Annual Transaction Threshold
The total amount received from related parties must exceed EUR 1 million per year.
Impact on Corporate Income Tax in Thailand
Thailand’s standard corporate income tax rate is 20%, meaning that most Thai limited companies will not be affected by the STTR MLI.
However, the STTR rules will have a substantial impact on businesses that enjoy tax incentives in Thailand, including:
- BOI promoted companies
- International Business Center (IBC) entities
- Special Economic Zone (SEZ) businesses
These entities often benefit from corporate income tax exemptions (0%) or reduced tax rates below 9%, placing them directly within the scope of the STTR MLI.
STTR MLI Impact on BOI, IBC, and SEZ Businesses
Once Thailand officially joins the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI), the Thai Revenue Department will have the authority to collect additional tax on qualifying cross-border transactions involving BOI, IBC, and SEZ companies.
This may significantly reduce the effectiveness of existing Thailand tax incentives and increase the importance of:
- Transfer pricing compliance in Thailand
- Review of intercompany agreements
- Cross-border withholding tax planning
- Pillar Two tax risk assessments
How Businesses in Thailand Should Prepare for STTR MLI
To mitigate potential risks, businesses operating in Thailand should:
- Review related-party transactions and payment flows
- Analyze DTA benefits and withholding tax exposure
- Monitor updates from the Thai Revenue Department
- Seek professional advice on STTR MLI compliance in Thailand
Early preparation will be essential for multinational companies and investors relying on Thailand tax exemptions.
Conclusion: The Future of International Tax in Thailand
The implementation of the STTR MLI in Thailand represents a significant shift in Thailand’s international tax landscape. While standard corporate taxpayers may see little impact, BOI, IBC, and SEZ businesses should expect increased scrutiny and potential additional taxation.
As Thailand aligns with global minimum tax standards, proactive tax planning and compliance will be critical to managing risks and maintaining tax efficiency.
If you want to engage H&P for tax planning and tax optimization, please contact our tax lawyers and accountants at info@herrera-partners.com
