Transfer Pricing
Country Summary

This document provides an overview of Thailand’s transfer pricing landscape, which is influenced by international principles, especially the OECD Guidelines. It explains how Thailand uses the arm’s length principle, focuses on the determination of market prices, and the role of the Revenue Department. The document also discusses the evolving regulatory environment and the importance of Action 13 within the BEPS framework.


Alignment with International Guidelines

Thailand’s Transfer Pricing Guidelines offer only broad guidance on determining market prices. However, the “Supplementary Clarification on the Determination of Market Price for Multinational Enterprises” provides further insights on applying these guidelines. Thailand largely mirrors the OECD’s principles, especially the arm’s length principle, performing functional and economic analyses of related-party transactions and selecting appropriate transfer pricing methodologies. The Thai guidelines are influenced by Australia’s transfer pricing model.

Limited Role of OECD Guidelines

Thailand uses the OECD Guidelines as a reference but does not strictly adhere to them. Recommendations from the OECD Guidelines are considered, provided they do not conflict with Thai tax law.

BEPS Implementation

Thailand joined the BEPS Inclusive Framework and is obliged to implement Action 13, focusing on Country-by-Country (CbC) reporting. However, recommendations for finalizing domestic legal and administrative frameworks and achieving confidentiality, consistency, and appropriate use prerequisites in exchange of information frameworks have not been fully addressed.

Transfer Pricing Legislation and Provisions

The legal framework for transfer pricing in Thailand includes sections of the Thai Revenue Code, Double Tax Agreements, and accounting standards (Standard Accounting No. 37 and 47). While there are no specific transfer pricing provisions in the Revenue Code, authorities can adjust net profits using general provisions like Section 65 bis (4), Section 65 ter (13), and Section 65 ter (14).

Definition of Related Party

Thailand adopts the OECD Guidelines’ definition of related parties. This includes entities with significant shareholding relationships, both direct and indirect, and entities with dependent relationships in terms of capital, management, or control.

Transfer Pricing Documentation

Though Thailand is not an OECD member, its transfer pricing guidelines generally follow OECD principles. While the OECD Guidelines are not binding, they provide useful guidance, especially in areas not covered by local instructions.

Advance Pricing Agreement (APA)

Thailand accepts only Bilateral APAs, with an effective period of 3 to 5 accounting periods. A detailed application process must be followed, including documentation submission within 7 working days from the delivery date to foreign tax authorities.

Audit Practice

Transfer pricing audits are common in Thailand, especially when required documents are not disclosed or when transfer pricing filing requirements are not met. Revenue officers conduct company visits and scrutinize transactions raising concerns like inconsistent profit margins or high intercompany charges.

Transfer Pricing Documentation Contents

Documents required under Departmental Instruction No. Paw. 113/2545 include business entity structure, budgets, business strategies, transaction nature, pricing policies, and reasons for selecting specific methods.

Choice of Transfer Pricing Method

Thailand accepts several methods, including the Comparable Uncontrolled Price Method, Resale Price Method, Cost Plus Method, Profit Split Method, and Transactional Net Margin Method. The most appropriate method should be selected.

Economic Analysis – Benchmark Study

Financial data from companies, both local and foreign, can be used as comparables. Local comparables are preferred, but foreign comparables are also accepted.

Inter-company Legal Agreements

Inter-company legal agreements are considered but hold a lower rank than the “conduct of parties” concept, as per OECD 2017 Guidelines.

Financial Statements

Taxpayers must provide half-year and year-end corporate income tax returns, audited financial accounts, and statements of directors. These financial statements are crucial for tax authorities’ assessment.

Penalties and Interest Charges

Thailand does not have specific transfer pricing penalties. Instead, general corporate tax penalties may apply, including fines of up to 100% of additional corporate tax and interest surcharges. Failure to provide required transfer pricing disclosure statements may result in penalties and fines. However, penalties can be reduced if the taxpayer cooperates fully during a tax audit.

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