International Taxation - Thailand ratifies the MLI-Double Tax Agreement TH-GER

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After Thailand joined the OECD’s (Organisation for Economic Cooperation and Development) BEPS (Prevent Base Erosion and Profit Shifting) Inclusive Framework in 2017, the Thai Cabinet on 28 December 2021 approved  the Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). 
  

Details

The MLI was signed on 09.02.2022, making Thailand the 98th jurisdiction to sign the MLI. The instrument of ratification was deposited with the OECD on 31 March 2022. The Convention is set to enter into force for Thailand on 1 July 2022. Thailand has chosen to implement Articles 5, 6, 7, 12, 13, 14, 15, 16, 17 of the MLI.
  
Along with the instrument of ratification, Thailand has submitted a list of 58 Agreements on the Avoidance of Double Taxation (DTA), including the DTA with Germany, which Thailand designates as covered tax agreements (CTAs). In comparison, Germany did not consider the DTA with Thailand to be a covered tax agreement. The implications for international taxation between Thailand and Germany remain to be seen. 
  

Potential consequences

With regards to BEPS, signing the MLI will have significant consequences for “Prevention of tax treaty abuse” (BEPS Action Point 6) and “Mutual Agreement Procedure” (BEPS Action Point 14). Other relevant action points such as “Harmful tax practices” as well as “Country by Country Reporting” had been addressed by Thailand earlier. However, it is too early to comment on the tax consequences in detail. 
  
In any case, companies are well advised to re-consider aggressive tax planning strategies. The main idea of BEPS is to ensure taxation of profits in the country they have originated in. 

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