Director-General Issues Notification on Refundable Dividend Tax Excluded from Top-Up Tax Calculation, Effective from 2025 Onward

The Royal Decree on Top-Up Tax B.E. 2567 (2024) (“Royal Decree”) was enacted at the end of 2024. The Royal Decree introduces a top-up tax applicable to multinational enterprise (MNE) groups with annual consolidated revenue of EUR 750 million or more in at least two of the four fiscal years preceding the tested year. Consolidated financial statements must be prepared in accordance with an acceptable accounting standard.

Top-Up Tax Computation¹

The top-up tax is calculated as the difference between the 15% minimum tax rate and the effective tax rate (ETR) in the relevant jurisdiction(s). This percentage is applied to the GloBE income or loss in the relevant jurisdiction, after deducting a substance-based income exclusion, which is determined based on tangible assets and payroll costs.
The law takes effect on 1 January 2025. Since its enactment, three key provisions have been issued, through the Royal Decree: 

1.    Recognition of Accounting Standards: A list of more than 17 jurisdictions whose generally accepted accounting principles (GAAP) are recognized, including Australia, Brazil, Canada, EU member states, EEA member states, Hong Kong, Japan, Mexico, New Zealand, China, India, South Korea, Russia, Singapore, Switzerland, the UK, and the USA. For more information, please see https://shorturl.at/b1BCa (Thai language).

2.    Specification of the refundable dividend tax: Clarification as to the characteristics of  the refundable dividend tax that is excluded from the scope of top-up tax calculation (discussed in more detail below).

3.    Guidelines on Entity Location: Rules for determining the location of entities with multiple establishments or special characteristics, which will be discussed in the next article.

On 21 October 2025, the Notification of the Director-General on Top-Up Tax (No. 2) (“Notification”) was issued, to define the characteristics of the refundable dividend tax that is excluded from the scope of top-up tax calculation.

Section 24 of the Royal Decree specifies  which taxes are included or excluded from the top-up tax calculation for each affiliated juristic person,  to ensure proper collection of top-up tax in accordance with the required procedures. For example, Section 32, paragraph 2 provides that the effective tax rate shall be calculated after excluding in-scope taxes after adjustment, as well as considering  the profits or losses of each entity that qualifies as an investment entity. 

Although there are additional computational requirements, they fall beyond the scope of this article, which will focus on the Notification, which specifies the types of taxes that are not within the scope of top-up tax computation. One such tax is the “refundable dividend tax under the criteria prescribed by the Director-General of the Revenue Department.” However, the specific rules governing and details of this matter have not been clarified by the Director-General at this time.

Criteria in the Notification:

“Disqualified Refundable Imputation Tax”² refers to any tax recognized or paid by an affiliated juristic person that has the following characteristics:
1.    Refundable to the beneficial owner of the dividend (for example, where tax has been withheld in advance—whether from profits or dividends—but when the dividend income later is included in the corporate income tax computation, the beneficial owner is entitled to a refund of the tax previously paid or withheld).
2.    Creditable against taxes payable by the beneficial owner of the dividend, except where the tax payable relates to that same dividend (for instance, where tax has been withheld in advance but may be credited as a dividend tax credit against corporate income tax payable).
3.    Refundable to the affiliated juristic person paying the dividend upon payment of the relevant dividend. (In this case, the author is of the opinion that Thai tax law contains no provision allowing a dividend-paying company to claim a refund of the withholding tax remitted on behalf of the recipient).
However, this exclusion does not apply to:
1.    Qualified imputation tax; or
2.    Withholding tax on dividends that has been refunded to the dividend recipient, in whole or in part (under Thai tax law, a company that pays dividends is required to withhold tax at the rate of 10%³).

Qualified Imputation Tax

“Qualified Imputation Tax” refers to a tax that falls within the scope of, and is recognized or paid by, an affiliated juristic person or a permanent establishment, where the tax is refundable to or creditable against the tax liability of the beneficial owner of the dividend paid by the affiliated juristic person or the main entity of the permanent establishment, and meets the following criteria:  
1.    Refundable  or creditable in a foreign jurisdiction, i.e., outside the jurisdiction in which the  dividend-paying entity is subject to tax, where the refund or credit is granted under a foreign tax credit system. (For example, Thailand’s Double Tax Agreements (DTAs) with various countries contain foreign tax credit rules, and this criterion applies where Thailand has a DTA with the jurisdiction in which the constituent entity is located.)
2.    Refundable or creditable against the tax liability of the beneficial owner, provided that the beneficial owner is subject to tax on the dividend income in the same jurisdiction as the constituent entity paying the dividend, at a rate not lower than the minimum tax rate.
3.    Refundable or creditable against the tax liability of an individual beneficial owner  who is a tax resident of the jurisdiction imposing the in-scope tax on the dividend-paying entity,  where that individual is taxed on the dividend income in the same manner as ordinary income.
4.    Refundable or creditable against the tax liability of a legal entity under Section 27 of the Royal Decree, in accordance with the criteria prescribed by the Notification (with the approval of the Minister), and having one of the following characteristics: 
4.1    Government agencies;
4.2    International organizations;
4.3    Non-profit organizations;
4.4    Pension funds;
4.5    Investment entities not belonging to the same MNE group; or
4.6    Life insurance companies receiving dividends as part of pension fund operations

Conclusion: 

A refundable dividend tax that is excluded from the scope of taxes under Section 24 must qualify as a Disqualified Refundable Imputation Tax.

For accounting periods beginning on or after 1 January 2025, entities will fall within the scope of the Royal Decree, even though the deadline for submitting information to the Revenue Department is 15 months from the last day of the accounting period of the ultimate parent entity of the multinational enterprise (MNE) group. ⁴

Under Thai Accounting Standard No. 12 – Income Taxes, entities must adjust their deferred tax to recognize the effect of the new law; the Federation of Accounting Professions has clarified that, although the Royal Decree on Top-up Tax takes effect in 2025, the computation details remain unclear pending the issuance of subordinate legislation. Nevertheless, entities subject to the Royal Decree and related financial reporting standards must ensure that their financial statements do not understate top-up tax expenses. 

Once the subordinate legislation is enacted, entities must adjust any differences (if any) immediately, during the reporting period in which the law becomes effective. If the subordinate legislation is enacted and becomes effective after the end of the reporting period but before the financial statements are approved for issuance, entities must recognize the matter in accordance with Thai Accounting Standard No. 10 – Events After the Reporting Period. Further details are available (in Thai) at: https://shorturl.asia/UNky2 .

Multinational enterprise groups subject to the top-up tax must not only understand the tax laws applicable in each jurisdiction in which they operate but also maintain a clear understanding of the relevant accounting standards with which they are required to comply. In addition, they entities must continue to monitor forthcoming subordinate regulations that will clarify additional details under the tax law.
If you have any concerns about compliance with Thai tax regulations, please seek a professional consultation from qualified tax advisors for further guidance and support.

¹ Royal Decree on Top-Up Tax B.E. 2567 (2024), Section 28 to Section 40. 
² “An imputation tax credit is a tax credit passed on to shareholders who receive partially or fully franked dividends. The tax credit is in consideration of the tax the company has paid on its profits before passing those profits on to shareholders.” — Moneysmart, 2024. Imputation credit. [online] Available at: < https://moneysmart.gov.au/glossary/imputation-credit > [Accessed 31 Oct. 2025].
³ Section 3 of the Revenue Code, together with Section 5 of the Revenue Department Order No. Tor.Por. 4/2528
⁴ Royal Decree on Top-Up Tax B.E. 2567 (2024), Section 54

This article is intended as merely a regulatory overview, and is not intended to be comprehensive or to constitute legal advice. If you have any questions on this or on other areas of tax law, please do not hesitate to contact our Tax Team at SCL Nishimura & Asahi Limited.

Budhima Kerdsiri
Counsel

Hatairat Sukprasert
Associate

Authors