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.
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.
Thailand currently has Transfer pricing reporting through the Declaration Statement on Page 8 of the Corporate income tax filing (PND 50). Draft transfer pricing law has been introduced where taxpayers will be required to submit further high-level transfer pricing information (the relationship between companies and the amount of related-party transactions) when they file their Corporate income tax. 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 1 January 2019, so that the first filing date for the transfer pricing disclosure form is 31 May 2020 (for the period 1 January – 31 December 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. Accordingly, taxpayers should ensure they are prepared for mandatory reporting and retrospective reviews which could go back as far as FY 2015. 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.
Michael Anastasia has over fifteen years’ experience in taxation law in the Asia Pacific region and has been practising in Thailand since 2010. Currently working as Partner, Tax and Consulting at JNP Legal, he is a fully qualified CA with Chartered Accountants, Australia and New Zealand. He can be contacted at Michael@jnplegalthailand.com
About JNP Legal
JNP Legal is an International Law Firm based in Bangkok that offers Professional and Personal Commercial Law Services to locals and expatriates both in Thailand and abroad. Specialising in Corporate and Commercial Law, their dedicated team assists companies and individuals with a number of key legal consultancy services.