New Transfer-Pricing Law

On 21 November 2018, Amendment No. 47 to the Revenue Code in regard to transfer pricing was published in the Royal Gazette.

Keywords: Mazars. Thailand, Tax, Transfer-Pricing Law, Royal Gazette, Revenue Code, Revenue Department

30 November 2018

The key aspects of the new transfer-pricing law are similar to those mentioned in our previous update.

1. The Revenue Department’s tax auditors will be granted the authority to adjust corporate taxpayers’ revenue and expenses in relation to related-party transactions that were not at arm’s length according to the rules, procedures, and conditions set out in the related Ministerial Regulation.

2. The term “related party” is defined as: (a) a legal entity that either directly or indirectly holds 50% or more of the total shares of another legal entity; (b) a legal entity of which 50% or more of its total shares are held either directly or indirectly by a shareholder or partner that also directly or indirectly holds 50% or more of total shares of another legal entity; or (c) a legal entity that has a dependent relationship with another legal entity in terms of capital, management, or control, to the extent that one entity cannot be operated independently from the other. 

3. To relieve the double tax resulting from such adjustments, taxpayers who are deemed to have overpaid taxes on related-party transactions as a result of a transfer-pricing assessment will have the right to file a request for a tax refund within three years of the deadline for filing an annual corporate income tax return or 60 days of receiving notification of the tax assessment results, whichever is later, according to regulations set out by the Director-General.

4. Taxpayers who are deemed to be related parties under the definition, and which have annual turnover exceeding the threshold specified in the related Ministerial Regulation, which shall not be less than THB 200 million, will be required to prepare and file a transfer-pricing disclosure form together with their annual corporate income tax return. This form requires taxpayers to disclose relationships with related parties and the total value of related-party transactions during the accounting period.

5. The Revenue Department’s tax auditors will be granted the authority to request transfer-pricing documentation from taxpayers within five years of the report being filed. Taxpayers must submit such documentation within 60 days of receiving notice to do so from the tax auditors, with a possible extension to 120 days upon request. The transfer-pricing documentation will be due 180 days after receiving a notification from the Thai Revenue Department for the first time.

6. Taxpayers that fail to submit the transfer-pricing disclosure form or transfer-pricing documentation by the due date, or that submit the form or documentation with incorrect or incomplete information, will be subject to a maximum fine of THB 200,000.

The law will be effective for the accounting periods beginning on or after 1 January 2019. Therefore, the deadline for the first transfer-pricing disclosure forms for taxpayers having an accounting period from 1 January through 31 December 2019 will be 29 May 2020.

The Ministerial Regulations specifying the calculation of revenue and expenses of a related entity and determining the format and details of the transfer pricing documentation are expected to be issued soon.  In addition, the Revenue Department may also issue the Ministerial Regulations specifying exemptions and the revenue threshold for preparing and filing a transfer-pricing disclosure form.