Transfer Pricing in Thailand

The current law in Thailand requires taxpayers to be able to justify on any Thai Revenue Department review that both domestic and international related party transactions have been carried out at ‘market price’.

Currently, Thailand’s Revenue Department generally adopt the OECD Transfer Pricing guidelines in assessing “market price” with a preference for transactions based methods being the comparable uncontrolled price, cost plus and resale price methods. The transactional profits methods being the profit split and transactional net margin methods (using profit level indicators) can been accepted.

Comparable Benchmarking

Depending on the best method adopted, taxpayers are required to establish comparative/benchmarked data to justify that the transactions are carried out at “market price”. The Thai Revenue Department has a strong preference for Thai comparable benchmarks, however, if none are available then foreign benchmarks, provided they are comparable, can be accepted. Transfer pricing documentation should be reviewed and updated yearly with comparable benchmarks updated every two years.

Reporting

Thailand currently has Transfer pricing reporting through the Declaration Statement on Page 8 of the Corporate income tax filing (PND 50). On September 27, 2018, the National Legislative Assembly passed the Revenue Code Amendment Act where taxpayers will be required to submit further high-level transfer pricing information (the relationship between related parties and the amount of related-party transactions through a disclosure form) when they file their Corporate income tax. The threshold for reporting is for companies with annual turnover in excess of THB 200M requiring full transfer pricing documentation to be prepared. Thai Revenue Officers may use this information to select audit targets based on risk. Failure to disclose will result in a penalty of up to 200,000 Baht. Note that this is the penalty for disclosure only, further penalties and interest are also applicable for any subsequent transfer pricing adjustments to “market price” made by Thai Revenue Officers.

The new transfer pricing law will apply for accounting periods beginning on or after January 1, 2019.

It is worth noting that the statutory limitation period for a tax officer to request for a related company to submit information and evidence of information of transfer pricing documentation is five years from the date of submission of transfer pricing disclosure form. JNP Legal Thailand can assist taxpayers with their Transfer Pricing matters as follows:

• Transfer Pricing risk assessments,
• Functional analysis and choice of transfer pricing method,
• Comparable benchmarking,
• Local file and three-tiered Country by Country reporting and documentation, and
• Thai Revenue Department investigations.

Editor’s Note: This article was first published on August 2, 2018 and is updated on October 17, 2018, as per latest developments.