On 18 June 2019, the Ministry of Finance submitted for the Thai Cabinet’s further consideration a draft Ministerial Regulation (“Draft MR”) containing information necessary for taxpayers to prepare for TP documentation lodgment. The Draft MR is issued in order to enable the fair and effective implementation of Thailand’s new Transfer Pricing (“TP”) law (i.e. announced in the Royal Gazette on 21 November 2018).
The key highlights from the submitted version of the Draft MR are summarized below:
- Contractual terms;
- Functions performed by taking into consideration the assets used and risks assumed;
- Characteristics of assets transferred or services performed;
- Economic circumstances at the time of entering into the transaction; and
- Business strategies adopted by related parties.
(1) Expected benefits from the intangible property in question;
(2) Geographical limitation to use the intangible property right;
(3) Unique or non-unique characteristics of the intangible property; and
(4) Rights to co-develop the intangible property in future.
In light of the above, it is worth mentioning that the Draft MR now released appears to confirm that the Thai Revenue Department ("TRD") is moving towards implementation of the OECD’s TP Guidelines in Thailand.
With additional guidance now having been released with respect to preparation of the TP documentation required under Thailand’s new TP law, multinationals investing in Thailand and Thai corporations entering into related party transactions and with income from its business (or related income deriving from its business) exceeding Baht 200 Million, should pro-actively start preparing robust TP analysis and documentation.
This will be essential to an effective management of the risks associated with Thailand’s new detailed TP law and strict documentation requirements but will also be the key to support negotiations with the tax authorities on future proposed primary and secondary TP adjustments or imposed penalties (if any).
KPMG professionals in the transfer pricing group advise multinational corporations investing inbound and Thai corporations investing outbound on transfer pricing solutions to their value chain issues. Our Transfer Pricing team is well positioned to provide risk assessment reports in line with your global transfer pricing strategy to enable you to navigate through the complex and fast-changing transfer pricing environment resulting from the new regulatory changes in Thailand, as well as to support you in preparing transfer pricing documentation, Local File and Master File under the new requirements.