Transfer Pricing (TP) in Thailand

• Thailand’s TP regulations apply to all Thai companies, regardless of their size.
• TP refers to the pricing of goods, services, or intellectual property transferred between related parties. According to Thai tax laws, the adopted pricing must be comparable to that used by independent parties (the arm's-length principle).
• Following the OECD's BEPS (Base Erosion and Profit Shifting) action plans, tax authorities worldwide have conducted more thorough reviews of TP issues.
• The Thai Revenue Department (RD) uses specialised TP audit teams to scrutinise international transactions between affiliated entities.
• For corporate income tax (CIT) purposes, the RD has the power to adjust income if the consideration received is lower than the market price and there are no justifiable grounds for this. The RD can also adjust revenue and expenses relating to ‘related party transactions’ that were not conducted at arm's length, in accordance with the rules set out in the relevant Ministerial Regulation.
• These adjustments may result in additional tax liabilities, as well as surcharges and penalties. Furthermore, expenses incurred may be non-deductible for CIT purposes if they exceed the market price.

• Requests for a tax refund, even if related party transactions are minor.
• Interest arising from loans between related parties.
• Pricing adjustments during the year or at year-end to revise profit.
• Losses sustained over many years.
• Fluctuating profits/losses (e.g., moving from a profit to loss after the CIT holiday period has expired under a BOI-promoted project).
• Significant differences in profit or loss between BOI and non-BOI businesses, or between similar taxable and non-taxable transactions.
• Significant changes in supply/value chains or business models (e.g., business restructuring).
• Management service fee payments to affiliated entities.
• Other significant transactions between affiliated entities, including the trading of goods, providing services and making royalty payments.
• Advances to your parent company or overseas subsidiaries are made without formal loan documentation or interest being charged.
• Internal information obtained by RD officials when comparing with other similar businesses or industries (TP benchmarking study).

A Thai company with related party transactions and an annual turnover of at least THB 200 million:

• TP Disclosure Form: All related party relationships and transactions must be disclosed to the RD within 150 days of the end of the accounting period, which is the same deadline as for the annual CIT return.
• TP Report (TP Local File): The TP report (TP Local File) includes a factual analysis and a TP benchmarking study on intercompany pricing. The local file is due 60 days after the Thai Revenue Department sends the request notification. The report must be submitted in the Thai language.

A Thai company belonging to a multinational group with an annual consolidated turnover of at least THB 28 billion (around EUR 750 million):

• CbCR Notification Form: The CbCR notification form must be submitted within 12 months of the end of the Thai company’s accounting period.
• CbCR Report: The CbCR report must generally be filed by the ultimate parent entity in its home jurisdiction. The relevant tax authority will then automatically exchange the report with the Thai Revenue Department.

1. Conduct a TP review. Or conduct an analysis of existing TP policies and documentation. Use this to assess potential risks areas.
2. Prepare a TP report, including a benchmarking study, to analyse the profitability of your related party transactions compared to those of similar businesses operating in Thailand.
3. The TP report must adhere to Thailand’s  specific TP guidelines and regulations.

The Thai Revenue Department can request all TP documents within five years of TP Disclosure Form being filed for the respective fiscal year.

Failure to submit the mandatory TP documents may result in penalties of up to THB 200,000 per document. Additionally, penalties of up to 100% of the additional tax liabilities may apply. Interest on overdue tax payments is charged at a rate of 1.5% per month.

Given the challenging business environment in Thailand, you need a specialised TP team like ours to help you manage your TP requirements and risks.

• Tax Advice on TP Issues
• TP Planning
• TP Policy Implementation
• TP Reports and Documentation
• Benchmarking Studies
• Tax Investigation Support Services
• Operational TP Review