The draft of the law amending the Revenue Code on transfer pricing, which was approved by the Cabinet early this year, has been submitted to the National Legislative Assembly for consideration. Based on the information, the transfer pricing law will be in force for the accounting periods starting on or after 1 January 2019. This means that the first filing date of the report on the relationship between companies and the amount of related party transactions (collectively referred to as transfer pricing disclosure form), which will need to be filed with an annual tax return, will be on 30 May 2020 for the fiscal year ending 31 December 2019 and 28 August 2020 for the fiscal year ending 31 March 2020. The statutory limitation period for a tax officer to request the related company to submit the information and evidence of information needed for analyzing the transaction of related company, also known as ‘transfer pricing documentation’, is within 5 years from the date of submission of the transfer pricing disclosure form.
The latest draft states clearly that taxpayers who pass the income threshold will need to prepare and submit an annual report disclosing the relationship between related parties and the amount of related party transactions, regardless of whether such relationship exists throughout the entire accounting period, or whether the related parties had any intercompany transactions during the year. The minimum income threshold for taxpayers in an accounting period to be eligible for the exemption from preparing a transfer pricing disclosure form will be not less than THB30 million.
After the law is approved, the Revenue Department will subsequently propose the secondary legislations to the Cabinet of Thailand, which will cover the calculation of revenue and expenses of a Related Entity or Related Juristic Partnership which shall include consideration of arm’s length principle, comparability analysis, calculation/ determination of arm’s length range, tax assessment through the adjustment of revenue and expenses, consideration of condition for special transactions, e.g. intangible transactions and the request for Advance Pricing Arrangements (APAs). The transfer pricing disclosure form and the requirement for a preparation of the transfer pricing document will be announced after the law is enacted.
The draft transfer pricing law has reached the next significant milestone in the legislative process. With the proposed enforcement date starting on or after 1 January 2019, it may be implied that the law may be enacted within this year. With the tentative first filing of the transfer pricing disclosure form in May 2020, pro-active approach to preparation of robust transfer pricing analysis, documentation and anticipated required disclosures will be essential in managing transfer pricing risks, including discussions with the tax authorities on future proposed adjustments and reduced penalties.