Thailand’s move toward implementing the 15% Global Minimum Tax (GMT) under the OECD/G20 Pillar Two framework, which Thailand is in the process of implementing through legislative and administrative measures, has implications that extend well beyond tax compliance. For Thailand’s retail sector, the reform represents a structural intervention in how value is taxed, particularly in areas where large multinational digital platforms compete with local businesses.
The Online Platform Ecosystem: Shopee, Lazada and AliExpress
Large e-commerce platforms operating in Thailand are rarely single-entity businesses. Instead, they typically form part of integrated multinational groups with operations and assets spread across multiple jurisdictions. Shopee operates within the SEA Group ecosystem, a Singapore-headquartered technology company. Lazada is owned by Alibaba Group, while AliExpress serves Thai consumers primarily through direct cross-border sales.
Beyond Lazada and AliExpress, Alibaba maintains a wider commercial footprint in Thailand through logistics operations, cloud services, and platform-related support entities. These multi-location structures commonly allow for centralised ownership of intellectual property and technology, the use of cross-border service fees and royalties, and the maintenance of local operating entities that appear low-margin despite high transaction volumes. While such arrangements have historically been defensible under transfer pricing rules, they have also enabled significant profit to be reported offshore.
Why the Global Minimum Tax Changes the Equation
Under the Global Minimum Tax, multinational groups with global revenues exceeding €750 million must ensure that profits arising in Thailand are taxed at an effective rate of at least 15%. Where this threshold is not met, Thailand may impose a domestic top-up tax, or another jurisdiction within the group may collect the shortfall.
This marks a material shift in incentives. Profit-shifting no longer yields a net tax saving, thin local margins are no longer sufficient on their own, and the location of real economic substance is becoming more important than contractual form. For platforms such as Lazada and AliExpress, which rely heavily on cross-border structuring and centralized profit allocation, the GMT, applied at the multinational group level rather than on a transaction-by-transaction basis, represents a fundamental tightening of the tax environment.
Parallels with Thailand’s Arm’s-Length Transfer Pricing Rules
The Global Minimum Tax is not conceptually new within the Thai tax system. Thailand’s arm’s-length transfer pricing rules were introduced to address a familiar pattern: foreign-owned Thai subsidiaries generating substantial revenue while reporting minimal taxable profit due to inflated management fees, royalties, or service charges paid offshore, or through products being sold at below-market rates.
The Global Minimum Tax follows the same underlying policy logic, but operates at a higher structural level. Both regimes aim to prevent artificial profit erosion, ensure that Thai tax reflects real economic activity, and neutralise purely tax-driven structuring. The key distinction lies in their focus. Transfer pricing rules concentrate on the pricing of individual transactions, whereas the Global Minimum Tax focuses on outcomes, namely the effective tax rate itself.
In practice, GMT operates as a backstop. Even where transfer pricing arrangements technically comply with arm’s-length standards, the intended tax advantage may still disappear if the group’s overall effective tax rate in Thailand falls below the minimum threshold.
Why Brick-and-Mortar Retailers Are Largely Unaffected
Thai retail groups such as Central Department Store and The Mall Group operate under a fundamentally different business model. Revenue is generated where stores physically exist, staff, inventory, and infrastructure are located locally, and profits are already taxed in Thailand at standard corporate income tax rates.
As a result, effective tax rates for these retailers are already close to or above the 15% threshold. There is generally less reliance on offshore intellectual property or service entities, and the Global Minimum Tax imposes no material structural disadvantage. In effect, these retailers have long operated under the tax reality that GMT is now imposing on digital platforms, meaning the reform largely levels the playing field rather than favouring local businesses.
Competitive Impact: A Slow but Meaningful Rebalancing
The Global Minimum Tax will not eliminate the advantages of scale, logistics efficiency, or consumer convenience enjoyed by large online platforms. However, it does remove a previously hidden structural edge. Platforms are likely to face a reduced ability to suppress local profits, a higher real tax cost per transaction, and increasing pressure on commission structures and pricing strategies.
For local businesses, the potential upside lies in improved pricing parity, less tax-driven undercutting, and greater scope for competition based on service quality, speed, and consumer trust. When combined with the removal of low-value import exemptions, stronger VAT enforcement on e-commerce, and existing transfer pricing scrutiny, Thailand’s policy direction becomes clear: competition should be commercial, not fiscal.
A Familiar Thai Policy Pattern, Now Applied to Digital Platforms
For decades, Thailand has resisted business models that extract local value, externalise tax obligations, and contribute minimally to the domestic tax base. What is new is not the policy instinct, but the scale and digital nature of the businesses now affected.
The Global Minimum Tax represents an extension of a long-standing Thai tax philosophy, previously applied to factories and operating subsidiaries,into the realm of platform economies and cross-border digital trade.
Drop-Shipping from China: The Weak Point in the Online Retail Model
A critical feature of many large online marketplaces operating in Thailand is the extensive use of drop-shipping from China, particularly for low-value consumer goods. Platforms connected to Alibaba Group, including AliExpress and sellers operating through Lazada, have historically relied on a model in which goods are manufactured and dispatched directly from China, inventory is not held in Thailand, and Thai consumers interact with a platform interface while the underlying transaction remains cross-border.
This model has delivered significant cost advantages, particularly when combined with low logistics costs, preferential postal or courier arrangements, and historically light taxation on low-value imports.
From a legal and policy perspective, drop-shipping has long sat at the intersection of customs law, VAT enforcement, and corporate income tax structuring. Local Thai retailers selling the same products must import goods formally, pay customs duties and VAT upfront, maintain local inventory and retail premises, and bear employment, compliance, and property costs. By contrast, drop-shipping models have allowed platforms and overseas sellers to avoid inventory risk in Thailand, minimise taxable presence, and compete aggressively on price without equivalent tax friction.
The Policy Shift: GMT, VAT, and Customs Enforcement
While the Global Minimum Tax does not directly tax individual drop-shipped parcels, it materially alters the economics of the platform facilitating those transactions. When combined with the removal of low-value import exemptions, stronger VAT collection on e-commerce, and increased scrutiny of platform revenues and margins, reliance on large-scale, low-margin, tax-efficient drop-shipping becomes less attractive.
For large platforms, profits generated from facilitating Thai consumer transactions are harder to shelter offshore, platform fees and logistics margins face higher effective tax exposure, and the long-standing “race to the bottom” pricing model becomes less sustainable.
What also fueled this low-cost drop-shipping was that packages with a CIF value under THB 1,500 were historically exempt from import duties and, in some cases, VAT. This exemption was removed starting January 1, 2026, subject to implementing regulations and enforcement practice, with the policy objective of ensuring that low-value imports are no longer systematically exempt from duties and VAT.
By 2024, VAT enforcement in the e-commerce context had strengthened, building on amendments to the Revenue Code since 2021 that require foreign platforms to register and collect VAT on electronic services, along with subsequent measures addressing VAT on low-value imported goods. These reforms are intended to bring online platforms more in line with domestic retailers and help level the competitive playing field.
Indirect Benefits for Local Retailers
Although drop-shipping will not disappear entirely, its structural advantage is narrowing. For Thai retailers and distributors, this may result in reduced price distortion on commoditised goods, improved competitiveness for locally stocked products, and greater viability for omni-channel retail models that combine online sales with physical presence.
This is particularly relevant for retailers such as Central Department Store, which already operate fully within Thailand’s tax and customs framework and do not rely on cross-border fulfilment to achieve price competitiveness.
A Familiar Pattern in Thai Tax Policy
As with arm’s-length transfer pricing rules before it, Thailand is not seeking to eliminate cross-border commerce. Instead, it is addressing structural imbalances that arise when economic activity occurs in Thailand but tax contribution does not. Drop-shipping, like aggressive intra-group service fees in the past, is now being absorbed into a broader framework aimed at tax neutrality rather than protectionism.
Key Takeaway
The Global Minimum Tax, when viewed alongside VAT and customs reforms, does not prohibit drop-shipping, but it removes its ability to function as a tax-driven competitive weapon. For local businesses, this represents a gradual but meaningful rebalancing. For large online platforms, it signals a shift toward competing on efficiency, service quality, and logistics rather than structural tax advantages.
What This Means for Businesses Operating in Thailand
By bringing platforms such as Shopee, Lazada, and AliExpress into a tax framework that more closely resembles that faced by Thai retailers, Thailand is not favouring local businesses but removing distortion. Much like arm’s-length transfer pricing rules before it, the Global Minimum Tax is designed to ensure that profits generated in Thailand are taxed in Thailand, regardless of how sophisticated the corporate structure may be.
For local retailers such as Central and The Mall Group, long competing against global platforms with structural tax advantages, the reform may not be a silver bullet, but it represents a meaningful step toward fairer competition.
Please note that this article is a high-level discussion of policy direction and economic implications and does not constitute legal or tax advice. If you would like to understand how the Global Minimum Tax and related reforms may affect your business, please contact us for tailored advice.