The newly approved Transfer Pricing Act, which aims to regulate transfer pricing between Thai companies and affiliated companies, and will be added as Section 71 Bis to the Thai Revenue Code, will have a big impact on companies in Thailand. For the accounting period of 1 January – 31 December 2019, the Transfer Pricing Act will require companies with annual revenue of over THB 200 Million (approx. EUR 6 Million) to submit transfer pricing documentation together with the annual tax return to the Thai Revenue Department. On 18 November 2019, the Thai Revenue Department published its guidelines on what information must be included in such transfer pricing documentation.
In the case of a transfer of profit under Section 71 Bis, transfers falling under the following conditions must be reported.
In the case of companies or partnerships, there should be the following relationships:
holding, directly or indirectly, shares of not less than 50% of the
total shares. For partnerships, to be a partnership in another
company of not less than 50%.
b. Being shareholders in another company for not less than 50%, directly or indirectly. In the case of partnerships, being a partner, directly or indirectly, for not less than 50% of the total capital.
c. A dependent company where the company has interrelated relationships in the means of investment, management, or control under the Ministerial Regulation.
Companies with the aforementioned relationship that have different regulations commercially and financially but are doing transfer pricing to avoid tax.
The Director-General of the Revenue Department used Section 71 ter of the Revenue Code to issue an announcement, dated 7 November 2019, which forces companies with annual revenue of over THB 200 Million to report about interrelated companies and partnerships and the value of transactions between them in each accounting period. We have provided you with the official Disclosure Form of the Thai Revenue Department (Annex 1) and an unofficial English translation (Annex 2). The form must be submitted to the Revenue Department together with the annual tax return within 5 months after the end of the fiscal year.
Please note that within 5 years after submission of the Disclosure Form, the assessment officer, upon the approval of the Director-General, may ask a company or partnership to submit further supporting documents to analyze the transfer pricing between the two companies. The company must submit additional supporting documents within 60 days after receiving the notice. This period can be extended up to 120 days.
This means, that the first filing date for the report, stating the relationship between companies and the amount of related party transactions (referring to the Disclosure Form), will be on 30 May 2020 for the fiscal year ending on 31 December 2019, and on 28 August 2020 for the fiscal year ending 31 March 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.