On 21 November 2018, Thailand’s new transfer pricing law was enacted and published in the Official Gazette and will be effective from 1 January 2019, which was approved by the National Legislative Assembly in 27 September 2018.
Tax assessment officer’s authority:
Section 71 bis provides tax assessment officers with authority to adjust income and expenses for corporate income tax, cross-border withholding tax and profit remittance tax purposes to arrive at the income and expenses as if the related companies or partnerships had operated independently (i.e. the arm’s length standard).
It also indicates the prescription period for claiming a tax refund where the tax assessment officers make a transfer pricing adjustment under this section. Tax refunds resulting from a transfer pricing adjustment can be requested within 3 years from the due date for filing of the tax return or within 60 days of receiving written notice of a transfer pricing adjustment from the tax officers.
Definition of Related parties
Related parties” are defined as two or more legal entities wherein:
- a person holds directly or indirectly at least 50% of the share capital of the other entity;
- a shareholder holds at least 50% (directly or indirectly) of the share capital of both entities; or
- a person has a dependent relationship through participation in the capital, management or control of another entity as prescribed by the Ministerial Regulations.
Transfer pricing documentation
According to Section 71 ter, requires companies or partnerships with related party transactions to file a report (disclosure form) with the annual corporate tax return, which provides information on the relationship between entities and the value of inter-company transactions.
Tax assessment officers, upon approval from the Director-General of the Thai Revenue Department (“TRD”), can request transfer pricing documentation within 5 years after the submission of the disclosure form. The documentation will be due 180 days after receiving a notification from the TRD for the first time. Thereafter, the files will be due within 60 days with possible extension to 120 days upon request.
Exemption from documentation requirements
The disclosure form or transfer pricing documentation will be exempted if the company or partnership has revenues less than THB 200 million.
Penalty
According to Section 35 ter, failure to lodge the disclosure form or transfer pricing documentation by the due date or lodgement of incomplete/incorrect disclosure form or transfer pricing documentation will result in a fine not exceeding Baht 200,000.
