Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit gaps and mismatches in tax regulations to artificially shift profits to low-tax or no-tax locations.
Keywords: Mazars, Thailand, Tax, OECD, BEPS, IHQ, ROH
03 January 2018
The Organization for Economic Co-operation and Development (OECD) introduced the Action Plan on BEPS in 2013. There are four minimum BEPS standards that all OECD member countries which are part of the Inclusive Framework have agreed to implement, including Action 5 – harmful tax practices.
Thailand agreed to join the Inclusive Framework in 2017. Part of Action 5 relates to preferential tax regimes that may facilitate BEPS. A country with a preferential tax regime may be placed on the EU’s tax blacklist. Several tax incentives in Thailand, such as those for an International Headquarters (IHQ), a Regional Operating Headquarters (ROH), and a Treasury Centre were designated preferential tax regimes in a BEPS progress report on harmful tax practices recently published by the OECD.
Therefore, it is possible that such tax incentives will be reduced. However, it is also possible that Thailand will not adjust those incentives, as Thailand is not an OECD member. In addition, many tax practices in Thailand do not conform with OECD practice. Furthermore, the Thai government has not taken any action on this issue. Therefore, Thai taxpayers receiving such tax incentives should be aware of this issue, but should also continue conducting business as usual until there is any further action on the part of the Thai government.