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Thailand: New transfer pricing disclosure form may increase customs valuation risk

Thailand: New transfer pricing disclosure form

Beginning in 2020, certain taxpayers are required to submit a transfer pricing disclosure form. The information on the transfer pricing disclosure form may increase the customs valuation risk with regard to certain imports.

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Transfer pricing disclosure

The Thai Revenue Department in November 2019 released guidance (a notification) concerning a transfer pricing disclosure form. The transfer pricing disclosure form requires the reporting of information concerning the relationships between related parties and the value of related-party transactions. Taxpayers required to submit a transfer pricing disclosure form are those with related-party transactions, total annual operating revenue of at least THB 200 million or more, and an accounting period starting from 1 January 2019.

Intercompany payments made in accordance with a group’s transfer pricing policy or intercompany agreements that must be listed in the transfer pricing disclosure (e.g., agreements concerning royalties, license fees, technical service fees, management fees, and commission fees) may also be reflected in the customs value of imported goods if they meet the conditions prescribed under the customs regulation.


Customs value

Related-party transactions have been one of the key areas of focus for post-clearance audit conducted by the Thai Customs Department. The information obtained from the tax authority—such as withholding tax returns (Form P.N.D. 54) and self-assessed VAT returns (Form P.P. 36)—may be a primary source of information for the customs authority to identify whether the importers have significant intercompany payments. The customs authority has been using such information, together with the importers’ information available in its database, to decide if the customs authority needs to scrutinize importers and specifically whether their related-party transactions have any implications on the customs value of imported goods.

In 2020, when taxpayers begin to submit the transfer pricing disclosure form to the Thai Revenue Department, the Thai Customs Department will be able to collect complete data with regard to related-party transactions of the taxpayer. The disclosure form could become the most transparent source of information for the customs authority to scrutinize importers regarding their related-party transactions and may lead to further inspections on customs valuation issues.

For instance:

  • If the customs authority discovers from the transfer pricing disclosure form that the cost of purchasing goods from related parties is significantly different from the total declared customs value on import declarations, it may lead to scrutiny by the customs authority of the related-party transactions to determine whether the declared customs value is the transaction value of imported goods.
  • If the customs authority discovers from the transfer pricing disclosure form that there are royalties and/or other intercompany payments paid to overseas related parties, the customs authority may question whether the royalties and/or intercompany payments paid must be included in the customs value of imported goods. In such instances, the customs authority may request supplementary documents (such as intercompany agreements or transfer pricing documentation) for comprehensive reviews. 


KPMG observation

It appears that the customs authority’s surveillance of related-party transactions could be enhanced with the information provided to the tax authority on the transfer pricing disclosure form. If an importer is unable to provide clarification about the related-party transactions or fails to include the value of related-party transactions in the customs value of the imported goods, the importer may be accused of customs duty evasion (the penalty for which includes imprisonment as well as a penalty ranging between 50% to 400% of the customs duty shortfall.

With the customs authority’s increasing awareness of related-party transaction issues, it may be prudent to take preventive steps in order to address potential customs risks—in particular, those entities that have:

  • Import transactions involving related parties
  • Significant amounts of intercompany payments and/or transfer pricing adjustments
  • Total annual operating revenues of THB 200 million or higher
  • An accounting period starting from 1 January 2019 onwards

To be thoroughly prepared, such taxpayers need to consider the following actions before submitting their transfer pricing disclosure form:

  • Review the list of related-party transactions and identify if any transaction can affect the customs valuation of imported goods
  • Review intercompany payment agreements, including customs risks in relation to payment conditions, services in the agreements, and actual services received
  • Review transfer pricing policy and documents, any advance pricing agreement (APA), and transfer pricing-related transactions as well as practice related to import transactions


Read a December 2019 report prepared by the KPMG member firm in Thailand

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