BOI and Pillar Two: what the global minimum tax means for your BOI incentives in Thailand

TGS Innovised — De Voorwaarts

Updated: 30 September 2026

BOI promotion can exempt a Thai manufacturing company from Thai corporate income tax for many years. But is that company part of a group with revenue of € 750 million or more? Then Pillar Two ensures that the profit is still taxed at a minimum of 15%, and since 2025 Thailand has collected that top-up tax itself. How do BOI and Pillar Two interact, what does this mean for your BOI incentives, what choices do you have, and what should you watch out for in your tax returns?

Who needs to consider BOI and Pillar Two?

Groups with consolidated revenue of at least € 750 million (approximately THB 28 billion) in at least two of the four preceding years that have a BOI-promoted company in Thailand. The parent company can be located anywhere: in the Netherlands, elsewhere in the EU or outside it. Nothing changes for smaller groups; for them, our article “Thailand BOI incentives: investing in Thailand with BOI promotion” is the starting point.

Pillar Two in Thailand: the Thai top-up tax

Thailand implemented Pillar Two through the Emergency Decree on Top-up Tax B.E. 2567. It applies to fiscal years beginning on or after 1 January 2025 and contains:

1. A domestic top-up tax (DTT, a qualified domestic minimum top-up tax or QDMTT) on low-taxed Thai profits.
2. An income inclusion rule (IIR) for Thai parent companies.
3. An undertaxed profits rule (UTPR) as a backstop.

The Thai return must be filed within 15 months after the end of the group’s fiscal year, or within 18 months for the first year. For a group with a calendar year, the first deadline is therefore 30 June 2027 (for fiscal year 2025). If there are several Thai group entities, they can designate one entity to pay the top-up tax. The designation must be notified within 15 months; all entities remain jointly liable. At the end of December 2025, the Thai cabinet approved the first implementing regulations (see the Revenue Department announcement).

Why a domestic top-up tax? Without a Thai levy, the parent’s country (for example the Netherlands, through the IIR) would collect the top-up tax on the Thai profits. With a qualified Thai top-up tax, the tax stays in Thailand. For the group, the amount makes little difference; what changes is where and how it is paid.

Why BOI incentives and Pillar Two clash

Pillar Two looks at the effective tax rate (ETR) per jurisdiction: the profit taxes paid divided by the profit under the GloBE rules (the OECD Global Anti-Base Erosion model rules). If the ETR is below 15%, a top-up tax up to 15% applies. A BOI exemption reduces the Thai ETR to almost zero. Most of the benefit of the exemption then flows back through the top-up tax.

Most, but not all. The profit is first reduced by the substance-based income exclusion (SBIE): a percentage of payroll costs and of tangible assets in Thailand. For fiscal years beginning in 2026, this is 9.4% of payroll costs and 7.4% of the carrying value of tangible assets. For a capital-intensive factory, this can shield a substantial part of the profit.

A common misconception: the BOI split

A BOI company must split its results into a BOI part (exempt) and a non-BOI part (taxable). This split is needed for the Thai tax return and BOI reporting, but plays no role in the Pillar Two calculation. Pillar Two looks at total Thai profit and total Thai tax. Only the tax paid on the non-BOI part counts as tax paid.

Worked example: BOI exemption or 10% rate?

The BOI offers groups within the scope of Pillar Two the option to convert their remaining exemption into a reduced rate of 10% (a 50% reduction), for twice the remaining exemption period, capped at 10 years. New applicants can choose this option straight away. Is it worthwhile? A simplified example:

Assumptions: Thai manufacturing subsidiary, stable GloBE profit of € 2,000,000 per year, payroll costs of € 800,000, carrying value of tangible assets of € 2,400,000, 4 years of exemption remaining. SBIE = 9.4% × € 800,000 + 7.4% × € 2,400,000 = € 252,800. Excess profit: € 1,747,200. For simplicity, the SBIE percentages are kept constant for all years; in reality, they decrease slightly every year until 2033.

In the first years, the exemption is slightly more favourable, because the SBIE shields part of the profit. Over the full period, converting is approximately € 350,000 more favourable in this example, because the low tax lasts twice as long. With lower or fluctuating profits, more substance or a shorter remaining period, the outcome may differ. Always run the numbers for your own situation.

Start-up losses: use the GloBE loss election

New factories often make losses in their first years. Because a BOI company usually does not recognise a deferred tax asset for those losses, they do not automatically count for Pillar Two. The GloBE loss election solves this: a deferred tax asset of 15% is calculated on the net GloBE loss, which later reduces the top-up tax.

Example. With the election, start-up losses of € 1,200,000 give rise to a deferred tax asset of € 180,000. In the first profitable year, this reduces the Thai top-up tax by up to that amount. Without the election, this benefit is lost.

The election is made in the first GloBE Information Return (GIR; in the Netherlands the bijheffing-informatieaangifte or BIA) that includes Thailand. If the group applies a safe harbour for Thailand in that year, the interaction must be assessed in advance.

Safe harbours: often no top-up tax in the first years

• De minimis (Transitional CbCR Safe Harbour): revenue in Thailand below € 10 million and profit below € 1 million (or a loss). The top-up tax is then zero. For many new factories, this applies during the start-up years.
• Simplified ETR test and routine profits test: an ETR of at least 17% (2026 and 2027), or profit not exceeding the SBIE amount. With a BOI exemption, you will usually not pass the ETR test.
• Duration: under the OECD Side-by-Side Package of January 2026, the transitional safe harbour applies to fiscal years beginning on or before 31 December 2027 (and ending no later than 30 June 2029). For fiscal years from 2027, a permanent Simplified ETR Safe Harbour will also be available.
• Please note: “once out, always out”. If the group does not apply the safe harbour for Thailand in a given year, it cannot do so in later years.

New rules for tax incentives: QRTCs

The Side-by-Side Package also introduces a Substance-based Tax Incentive Safe Harbour for fiscal years beginning on or after 1 January 2026. It applies to tax incentives linked to expenditure or production, up to a cap of 5.5% of the greater of payroll costs and depreciation, or alternatively 1% of the carrying value of tangible assets. A profit-based exemption, such as the traditional BOI exemption, does not qualify.

Thailand is therefore developing Qualified Refundable Tax Credits (QRTCs) for expenditure on R&D, training, efficiency and sustainability, among other things. Unused credits are paid out in cash from the fund for enhancing competitiveness. Under Pillar Two, such a credit counts as income rather than as a tax reduction, which is much more favourable. The cabinet approved the bill in principle in September 2025; final implementation is still pending. In November 2025, the BOI confirmed that the existing exemptions and rate reductions remain in place (BOI announcement). Check the current status with the BOI.

Where it goes wrong in practice

• Different fiscal year. Pillar Two uses the group’s fiscal year. Many Thai companies have a calendar year, whereas Indian and Japanese groups, for example, use April–March. The Pillar Two figures then come from the group reporting package, not from the Thai financial statements.
• Different figures. The Thai financial statements (often prepared under TFRS for NPAEs, the Thai standard for non-publicly accountable entities) differ from the group reporting package (IFRS or a comparable framework), for example for leases and capitalised costs. The group figures apply for Pillar Two. Document the reconciliation.
• Transfer pricing. A management fee or royalty paid to the parent reduces the Thai profit and therefore the Thai top-up tax. The Thai Revenue Department scrutinises these payments closely. See our article “Transfer pricing for SMEs”.
• Exchange results. A loan in euros or dollars produces exchange results that usually fall outside the BOI exemption for tax purposes and that affect the GloBE profit.
• Financial statements. The Thai top-up tax is a current income tax under TAS 12 / IAS 12, without deferred taxes for Pillar Two. If the group’s year does not coincide with the Thai fiscal year, recognise the expected top-up tax pro rata.

BOI and Pillar Two: the Dutch perspective

• Dutch holding company. If the ultimate parent is in a country without Pillar Two, the Dutch holding company applies the IIR to the Thai subsidiary. If the Thai top-up tax is qualified, it takes precedence and usually nothing remains to be paid in the Netherlands.
• Parent in the United States. Under the Side-by-Side Package, the IIR and the UTPR do not apply to groups with a US parent for fiscal years beginning on or after 1 January 2026. The Thai domestic top-up tax does continue to apply. Dutch legislation implementing this is still being prepared.
• Information return. The Dutch holding company often files the GloBE Information Return (BIA, in Dutch) as the designated entity, including the data and elections for Thailand. See our article “Pillar Two and DAC9: which returns and notifications must your group file?”.
• Thai return. DAC9 (the EU directive on the exchange of Pillar Two information) only governs exchange within the EU. Whether Thailand receives the Dutch return depends on international exchange agreements. In any case, the Thai return for the domestic top-up tax must be filed locally.
• Dividends. Nothing changes for the Dutch participation exemption (deelnemingsvrijstelling). However, less profit is available for distribution because Thailand levies a top-up tax.

Our tip

Consider BOI promotion and Pillar Two as a whole. For each project, calculate what the exemption, the 10% rate and any tax credits yield over the entire period, including top-up tax. Secure start-up losses with the loss election, and make sure the group figures for Thailand are included in the information return correctly and on time.

BOI and Pillar Two checklist

Frequently asked questions about BOI and Pillar Two

Advice on BOI and Pillar Two?

We will gladly calculate the consequences for your Thai company, together with our partners in Thailand. Contact our international tax specialists. See also “Thailand BOI incentives: investing in Thailand with BOI promotion”, “Pillar Two in the financial statements” and “DAC9 in plain language”.