On 29 Nov 2022, the Thailand Revenue Department published the details of Thailand's Notifications under the Multilateral Convention for BEPS.

This Insight has been updated for the Revenue Dept's published details.

The Multilateral Convention for BEPS

The Multilateral Convention to Implementing Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention for BEPS) is a result of the OECD/G20 BEPS Project, and is a leading instrument for updating double tax treaties and reducing tax avoidance by multinational enterprises.

It provides solutions for governments to close the gaps in existing double tax agreements, including:

• Modifying existing double tax agreements to eliminate double tax, and
• Implementing agreed minimum standards to counter treaty abuse.

Thailand joined the Multilateral Convention for BEPS on 9 February 2022.

Thailand's Notifications

On 31 March 2022, Thailand deposited its instrument of ratification for the BEPS Multilateral Convention with the OECD, and Thailand's Notifications to the OECD were the following:

Entry into Force

1. The Multilateral Convention for BEPS enters into force for Thailand on 01 July 2022, and

2. For withholding tax, enters into force on 01 January 2023.

Agreements Covered by the BEPS MLI

The double tax agreements that are Covered by the Multilateral Convention for BEPS are the following:

Armenia, Australia, Austria, Bahrain, Bangladesh, Belarus, Belgium, Bulgaria, Cambodia, Canada, Chile, China, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hong Kong, Hungry, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Kuwait, Laos, Luxembourg, Malaysia, Mauritius, Myanmar, Nepal, New Zealand, Oman, Pakistan, Philippines, Poland, Romania, Russia, Seychelles, Singapore, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzer-land, Tajikistan, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan and Vietnam.

Method for Elimination of Double Taxation

1. The Credit Method is Thailand's method for eliminating double taxation, and

2. The modification of existing double tax agreement texts from the Exemption Method to the Credit Method.

Modifying the Purpose of Covered Tax Agreements

The modification of existing double tax agreements to include the following text prescribing their purpose:

• “Intending to eliminate double taxation with respect to taxes under this agreement without creating opportunities for no or reduced tax through evasion or avoidance of tax (including through treaty-shopping to obtain reliefs for the benefit of residents of third jurisdictions).”

Prevention of Treaty Abuse / Shopping

The addition of provisions to existing double tax agreements for treaty abuse or treaty shopping according to the OECD's Principal Purpose Test (PPT).

Avoidance of Permanent Establishments through Commissionaire and Similar Strategies

The modification of existing provisions in double tax agreements that artificially avoid permanent establishments thru commissionaire and similar strategies.

Avoidance of Permanent Establishments through Specific Activity Exemptions

1. The modification of existing provisions in double tax agreements that exempt specific activities as permanent establishments due to them being prescribed as preparatory or auxiliary activities only, and

2. The addition of provisions in existing double tax agreements that prevent the avoidance of permanent establishments through assignment of responsibility to persons according to the permanent establishment anti-fragmentation rule.

Splitting-up of Contracts

The modification of the PE clauses in existing double tax agreements to prescribe measures to prevent the division of contracts by related parties to avoid having a permanent establishment (Splitting-up of Contracts).

Mutual Agreement Procedures

The modification of the Mutual Agreement Procedures in existing double tax agreements in line with the OECD's 2017 Model Tax Convention, including:

1. Allowing taxpayers to apply for a MAP with their country of residence;
2. Taxpayers having the right to submit a request for a MAP to within three years of the date of receipt of a notice of assessment;
3. Compliance with MAP results without the time constraints according to domestic law;
4. Contracting States making efforts to interpret the Convention and the Double Tax Agreements; and
5. Contracting States consulting each other for double taxation that's not eliminated under the Double Taxation Agreements.

Corresponding Adjustments

The modification of the Associated Enterprise provisions in existing double tax agreements to include the Corresponding Adjustment provisions in the OECD's 2017 Model Tax Convention.

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