Thailand’s New Transfer Pricing Guidelines

Posted by Reading Time: 6 minutes

By: Dezan Shira & Associates
Editor: Elizabeth Leclaire

Thailand’s vote this past May to implement a new transfer pricing law is expected to come into effect in the early part of the new year. Transfer pricing refers to the sale of goods or services between branches of a company or subsidiary companies to a parent enterprise, and most countries instate some form of transfer pricing regulations in order to ensure that sales between divisions of a company roughly mirror the cost of the same sale between separate enterprises.

Without transfer pricing regulations, companies will often raise or lower the selling price of a good or service depending upon the tax rate of a branch’s specific region. For example, branches located in countries with low tax rates will often raise transfer prices when selling in order to maximize an enterprise’s profit. On the other hand, prices will often drop among branches and subsidiaries located in high tax rate regions, allowing the enterprise to make money through discounted sales rates rather than direct profits.

The requirement that transfer pricing internal to a company is similar to transactions between unrelated companies is often referred to as an “arm’s length” requirement, and Thailand’s new regulations hope to establish stricter and more concrete guidelines for ensuring that an “arm’s length” basis is maintained in transfer pricing transactions. Thailand’s first transfer pricing laws came in to effect in 2002, but Thailand’s Revenue department at the time only suggested that enterprises adhere to an “arm’s length” standard, and companies were not held legally responsible for internal selling above or below market value.

 New Regulations

Once instated, the new regulations will require that related enterprises prove “arm’s length” transfer pricing. The Tax Revenue Division currently defines related enterprises as two entities with either a direct or indirect relationship in ownership, management, or control of a company. Thailand has declared that when submitting transfer pricing information, relevant documents must be “contemporaneous.” The government has yet to determine the specific parameters of “contemporaneous”, but has indicated that companies will be required to file all transfer pricing related documents at least 150 days prior to the end of the taxable year. Thailand’s cabinet has expressed plans to instate the new regulation in early 2016. The government has also warned companies that if the legislation activates before the end of 2015, enterprises whose financial years terminate before December 31st of this year will still be required to submit proper transfer pricing documents.

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Thailand’s Revenue Department will be responsible for examining transfer pricing documents, and taxpayers will be required to submit relevant documentation within a predicted one week timespan after receiving notice from the department. Currently, enterprises will be expected to submit documents explaining the ownership, management, and control relationship between two enterprises or an enterprise and its subsidiaries, as well as the calculation method used to determine “arm’s length” transfer prices. The Revenue Department has declared that companies will be held responsible for monitoring enterprises of similar business scope to ensure consistent “arm’s length” practices across industries.

While the new regulation will affect enterprises of all sizes and related offshore branches, large sized multinational enterprises are permitted to apply for a bilateral Advanced Pricing Agreement (APA) with the Revenue Department and corresponding offshore tax authority. An APA allows for an enterprise to establish a consistent transfer pricing rate for a period of either three to five years. Specific details relating to establishment and maintenance of an APA have not been released, but the government has announced that details will be arranged shortly after the implementation of the new transfer pricing regulations.

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If taxpayers discover an occurrence of double taxation as a result of changes in the transfer pricing legislation, companies will be able to file a tax refund claim within 60 days of receiving a tax assessment notification, or within three years of filing for a tax return.

Risks of Transfer Pricing Audits

In an effort to increase the legitimacy of enterprises’ transfer pricing activities, the new legislation centers around of locating suspicious instances where companies may not have followed the “arm’s length” basis. The government has detailed specific company actions that are more likely to lead to an audit, including one branch of an enterprise consistently reporting profit loss, suspicious fluctuations between profit and loss in a subsidiary company, lower profit margin than is reflected in the industry’s market, and a profit drop after a tax holiday. These four circumstances, and particularly the last one, indicate a change in transfer pricing as the result of different internal tax rates rather than overall marketplace variations.


Thailand’s cabinet has also indicated a shift to heightened penalties for enterprises engaging in illegitimate transfer pricing activities. Once implemented, not only will certain divisions of Thailand’s Large Taxation Office (LTO) engage in detecting illegal transfer pricing rates, but large scale LTO audit teams and local tax offices will be permitted to audit enterprises.

A failure to submit proper transfer pricing documentation can cost enterprises in Thailand up to US $12,000, and companies may be required to pay an additional fine of roughly US $3,000 if required information is lacking. The government is still working to determine the specific financial penalty incurred by businesses whose transfer prices are found to be outside the “arm’s length” range.

Looking Ahead

In the weeks before official implementation of Thailand’s new transfer pricing regulation, the government is encouraging enterprises to investigate and reform current transfer pricing practices if necessary. Thai officials have suggested that companies thoroughly examine profitability levels, transfer pricing documentation, and “arm’s length” policies. In addition, although Thailand has yet to release numerical definitions of what constitutes related enterprises, companies are urged to prepare for a stricter interpretation of relevant enterprises and should prepare for the upcoming regulations accordingly. 

Further support from Dezan Shira & Associates

For more information of tackling transfer pricing as well as other tax concerns in Thailand or ASEAN as a whole, please get in touch with the specialists at Dezan Shira & Associates at


Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

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