Thailand: Update on transfer pricing proposals - KPMG United States
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Thailand: Update on transfer pricing proposals

Thailand: Update on transfer pricing proposals

The Thai Revenue Department released its comments addressing certain issues and questions that were raised during a public consultation with respect to a revised draft version of transfer pricing legislation.


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Among the items addressed by the tax authorities are the following topics.

Defining “related entity or related juristic partnership”

For purposes of the draft transfer pricing legislation, the shareholding percentage is one of the criteria used to determine whether two entities are “related entities or related juristic partnerships.” However, in order to determine whether certain entities are related entities, the Thai Revenue Department may also look if there is actual and substantial power of control between those entities as well as to eventual indirect ownerships. Additional guidance is to be issued on this point.

Transfer pricing adjustments

The Thai Revenue Department clarified that the draft transfer pricing legislation also would regulate transfer pricing secondary adjustments.

Transfer pricing adjustments to a taxpayer's assessable income and allowable deductions by the tax officers under the draft Section 71 bis would not affect the value added tax (VAT) position of the taxpayer. On amendment of the assessable income and allowable deductions of an entity in respect of the draft Section 71 bis, there would not be automatic transfer pricing adjustments by the related counterparties because this would be under the exclusive responsibility of the respective tax officers.

Tax refunds

The draft transfer pricing legislation would provide additional tax refund claiming rights to taxpayers. 

Generally, taxpayers would submit a request for tax refund within three years from the tax return submission date. Under the draft transfer pricing legislation, however, if the original tax refund submission deadline had already expired but the taxpayer were to be notified of a transfer pricing adjustment by a tax officer, the taxpayer would still be able to submit a request for tax refund within 60 days after the notification date.

Transfer pricing disclosure form

The transfer pricing disclosure form would include general information regarding related-party transactions that the Thai Revenue Department expects taxpayers to have readily available. Thus, completion of the transfer pricing disclosure form would not be intended to create significant compliance burdens for the taxpayers. The information provided in the transfer pricing disclosure form would be intended to allow the Thai Revenue Department to assess the risk of tax evasion through intercompany transactions and the use of transfer pricing methods.

Certain thresholds (to be determined in relation to an entity’s total income) would be provided under regulations in order to exempt multinational entities from the disclosure requirements. An accounting period for preparation and submission would also be determined by regulation.

Transfer pricing documentation

Transfer pricing documentation would generally need to be prepared prior to or at the time of entering into related-party transactions in order to demonstrate that the transfer pricing policy is applied on an uncontrolled transactions basis. Thus, as the documents and evidence would be readily available, the view of the tax administration is that the transfer pricing documentation submission period of 60 days from the date that the taxpayer receives the notification would be appropriate to compile the documents and evidence in the form of the regulated transfer pricing documentation.

Additional guidance regarding the preparation of the transfer pricing documentation and related evidence would need to be provided.  

Penalty regime

A failure to report transactions or provide complete and accurate transfer pricing information and documentation would give rise to a penalty of up to 200,000 Baht—with the amount depending on the nature of the offences and circumstances—to be assessed on a case-by-case basis. Such penalties would have a statute of limitations of one year. 

The Thai Revenue Department would have the authority to reduce or exempt the taxpayers from a penalty under a transfer pricing adjustment procedure, provided the taxpayer prepares and submits the required information/ documentation as requested.

KPMG observation

What’s next? At this point, the Thai Revenue Department is expected to submit the result of the process of public consultation on the draft transfer pricing legislation to the Cabinet of Thailand for its consideration. 

Assuming that the Cabinet of Thailand approves the draft legislation and that the legislation is eventually enacted, multinational entities investing in Thailand—and Thai corporations investing outbound—would need to consider certain prudent steps about their transfer pricing arrangements. For instance, since the focus would be on the location where the economic activities are undertaken and values are created, companies would need to be able to identify any eventual non-arm’s length transfer pricing methods or prices of related-party transactions and prepare for the introduction of compliance requirements for transfer pricing disclosure and documentation as part of their transfer pricing policies.

Meeting the standards now for the proposed future mandatory documentation requirements could help companies manage risk within the current environment of detailed transfer pricing regulations, strict documentation requirements, sophisticated audit practices, and significant penalties for non-compliance. Pro-active preparation of robust transfer pricing analysis and documentation could be essential to negotiate with the tax authorities on future proposed adjustments and reduced penalties.


Read a November 2017 report prepared by the KPMG member firm in Thailand

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