Thailand

It's positive to note that Thailand's transfer pricing regulations are largely consistent with the OECD Transfer Pricing Guidelines for 2022. This alignment suggests that Thailand is likely following international best practices in the field of transfer pricing, as outlined by the OECD. In what specific aspects do you find the alignment, and are there any notable deviations or unique features in Thailand's regulations that stand out in comparison to the OECD guidelines?

The acceptable transfer pricing methods are comparable uncontrolled price, resale price, cost plus, transactional net margin, and profit split. These methods ensure that transfer prices are set at arm's length. Approval from the Director-General of the Thai Revenue Department is necessary for using other methods to justify their appropriateness.

Taxpayers with an annual income greater than THB 200 million and having related party transactions are required to prepare transfer pricing documentation. In the Local File, they must disclose details about their domestic and cross-border related party dealings, including the type of transaction, summary of intercompany contracts, benchmarking, documentation supporting arm’s length nature, details of business restructurings, and the impact of such restructuring on business profits.

The Transfer Pricing local file in Thailand includes details on the local taxpayer's business, related party transactions, functions performed, risks assumed, asset used analysis, and benchmarking analysis. It must be submitted within 60 days after receiving a formal written notice from the Thai Revenue Department (or 180 days for the first-time notice).

The Transfer Pricing local file in Thailand includes details on the local taxpayer's business, related party transactions, functions performed, risks assumed, asset used analysis, and benchmarking analysis. It must be submitted within 60 days after receiving a formal written notice from the Thai Revenue Department (or 180 days for the first-time notice).

The Transfer Pricing Master File is designed to disclose inter-company arrangements of a Multinational Enterprise (MNE) group at the global level. It must be submitted within 60 days after receiving a formal written notice from the Thai Revenue Department, or within 180 days for the first-time notice. The file must be kept available at the taxpayer's business place for 5 years. Additionally, it can be prepared in either English or Thai language, with a possible translation request by the Thai Revenue Department if it's initially prepared in English.

Country-by-country reporting (CbCR) serves to disclose the allocation of revenue, profits, and taxes among jurisdictions where members of a Multinational Enterprise (MNE) operate, promoting transparency in financial activities. The requirement for CbCR became applicable for accounting periods starting on or after 1 January 2021.

Multinational Enterprises (MNEs) with a consolidated group revenue exceeding THB 28,000 million for the prior accounting period are obligated to prepare and submit CbCR. Additionally, MNEs have the option to appoint a surrogate parent entity to file CbCR on their behalf, subject to specific conditions.

CbCR must be submitted within 12 months from the accounting year end, following the OECD format, and submitted in the English language in an XML file format.

CbCR notification is required in Thailand and should be submitted through a designated portal on the Thai Revenue Department website. Notification must be made as soon as possible but no later than 12 months from the accounting year end. In cases where an MNE group has multiple related companies in Thailand, one Thai related entity can be appointed to handle the notification on behalf of other entities within the group.

Taxpayers in Thailand are required to submit Transfer pricing disclosure form, Master File, and Thai Local File for accounting years starting from January 1, 2019. Starting from January 1, 2021, CbC reporting is also mandated, including the submission of CbC reports and notification to the TRD. Thai Local File contents reporting requirements are outlined under DGN 407.

Some risk factors include having a significant volume of intercompany transactions, consecutive operating losses, low profit margins, high management or royalty payments with related parties, differing prices or margins for similar products/services, variations between prices before and after tax holiday periods, and making payments to tax haven jurisdictions.

The potential penalties for incomplete transfer pricing documentation or late submission in Thailand are not to exceed THB 200,000 for each case, but the actual amount is subject to discretion by the Thai Revenue Department (TRD) based on justification.

he TRD prefers the use of local comparable companies for economic analysis, but may consider non-Thai comparable companies if local options are unavailable. Internal comparables are prioritized before external ones, and the use of the interquartile range is generally accepted by the TRD for benchmarking analysis.

APAs allow taxpayers to proactively reach agreements with the Tax Revenue Department (TRD) on applying arm's length principles to international intercompany dealings, providing greater certainty on transfer pricing and avoiding additional income tax if requirements are met. The APA generally covers a three to five-year period, with the possibility of review in case of material changes in trading circumstances. Additionally, the availability of the Mutual Agreement Procedure (MAP) in Thailand's extensive treaty network helps address double taxation, and it's important to note that only Bilateral APAs are accepted by the TRD.

Taxpayers with annual income less than THB 200 million are exempt from mandatory transfer pricing documentation. However, preparing documentation is still recommended to support arm’s length transactions and mitigate transfer pricing risk during tax audits.