Thailand’s Position on Permanent Establishment

Thailand’s Position on Permanent Establishment

In the recent 2025 OECD report, Thailand has reaffirmed its position as a "Non-Member Economy" that prioritises source-based taxation. By maintaining specific reservations on Article 5 - Permanent Establishment or “PE”, Thailand aims to ensure that foreign enterprises contributing to its economy through sustained physical or economic presence do not circumvent local tax obligations. These positions reflect a cautious approach toward the global trend of narrowing PE definitions, focusing instead on traditional and service-based activities.

Thailand’s reservations under Article 5 are designed to lower the threshold for creating a PE, thereby broadening its taxing jurisdiction. Notably, Thailand reserves the right to include the "exploration for" natural resources within the scope of a PE, extending beyond mere extraction. For physical locations, Thailand classifies a "warehouse" used for providing storage facilities to others as a PE.

Regarding time-based thresholds, Thailand maintains that building sites, construction, assembly, or installation projects constitute a PE if they last more than six months. This six-month rule also applies to supervisory activities connected to such projects and, crucially, to the "furnishing of services" (including consultancy) through employees or personnel, provided the activities continue for more than six months within any 12-month period.

Furthermore, Thailand resists the OECD’s attempt to exclude "delivery" from PE-exempt activities, asserting that maintaining a stock of goods for regular delivery should indeed constitute a PE. Regarding agency, Thailand stipulates that an agent who works wholly or almost wholly for a single enterprise is not considered independent. Lastly, Thailand reserves the right to deem insurance enterprises as having a PE if they collect premiums or insure risks within the territory through a non-independent agent.

Our View

For multinational enterprises (MNEs) operating in Thailand, these positions significantly increase the risk of creating a taxable presence. The six-month threshold for services and construction is shorter than the 12-month standard often found in other jurisdictions, requiring meticulous project management and time-tracking. Additionally, the inclusion of "delivery" and "warehousing" means that e-commerce and logistics companies must carefully evaluate their supply chain structures. Taxpayers should expect higher compliance costs and a greater likelihood of being subject to Thai corporate income tax on profits attributable to these deemed PEs.

How Grant Thornton Can Help You

At Grant Thornton in Thailand, our team of tax and legal experts is ready to advise on structuring cross-border technology arrangements to ensure alignment with Thai tax laws and international tax treaty obligations.