The second stage peer review report on the implementation of the Action 14 minimum standard (making dispute resolution mechanisms more effective) by Thailand was published by the OECD’s Inclusive Framework on 13 September 2022.

The report notes that Thailand has an extensive tax treaty network consisting of more than 60 tax treaties and has a small inventory of mutual agreement procedure (MAP) cases, with a small number of new cases submitted each year. The report notes that Thailand is mainly compliant with the minimum standard and has been working to address the remaining issues, but one new issue has been identified in the second stage peer review.

The report notes that all Thailand’s tax treaties contain a provision relating to the MAP, and generally the MAP articles are in line with paragraphs 1 to 3 of Article 25 of the OECD Model Tax Convention.

Thailand’s treaty network is mainly in line with the requirements of the Action 14 minimum standard, but around 15% of the treaties do not contain the equivalent of Article 25(1) of the OECD Model or the second paragraph of that Article, as the timeline to file a MAP request is shorter than the required three years from the first notification of the relevant action. Approximately 85% of the treaties do not include a provision for mutual agreements to be implemented regardless of any time limits in domestic law; or the alternative provisions for Article 9(1) and Article 7(2) to set a time limit for transfer pricing adjustments. Also, around 15% of the treaties do not contain a provision allowing the competent authorities to consult together to eliminate double taxation in cases not provided for in the treaty.

To comply with the minimum standard Thailand must therefore update a number of its tax treaties. Thailand has signed and ratified the multilateral instrument (MLI) to implement treaty-based provisions arising from the OECD project on base erosion and profit shifting (BEPS). The MLI can be used to update some of the treaties to bring them in line with the minimum standard. In the case of treaties that cannot be modified using the MLI, Thailand intends to update the treaties through bilateral negotiations, and will draw up a bilateral negotiation plan for this process.

Thailand is considered to meet the minimum standard with regard to the prevention of disputes and has an advance pricing agreement (APA) program in place. This includes the possibility of rolling back APAs to previous periods although no requests for roll-back have yet been received from taxpayers.

The report notes that Thailand provides access to the MAP in almost all eligible cases; but does not provide access to the MAP in transfer pricing cases where the relevant treaty does not contain the equivalent of Article 9 (2) of the OECD Model. Also, Thailand does not grant access to the MAP regardless of domestic remedies, as taxpayers must appeal to the domestic courts against the decision of the Commission of Appeal before gaining full access to the MAP.

Thailand has issued clear and comprehensive guidance on the availability of the MAP and its practical application. Thailand has also put in place a documented bilateral consultation or notification process for situations where the competent authority considers that the issue raised by taxpayers in a MAP request is not justified.

In the years from 2017 to 2020 Thailand completed MAP cases within the time period of 24 months required by the minimum standard. In some cases, the other country involved in the MAP case had difficulty in obtaining position papers from Thailand’s competent authority in due time and in obtaining responses to their own position papers. As the MAP case load has recently increased it will be necessary to monitor the extent to which the additional resources being made available can contribute to a more timely and effective resolution of MAP cases and more timely issuing of position papers and responses.

The report notes that Thailand’s competent authority operates fully independently from the audit function of the tax authorities and adopts a co-operative approach to resolving MAP cases in an effective and efficient manner. The organisation is adequate and appropriate performance indicators are used for performing the MAP function, however matching of MAP statistics was not carried out with all the treaty partners.

Although Thailand monitors the implementation of MAP agreements, it has a domestic statute of limitation for implementation of the agreements. There is therefore a risk that MAP agreements cannot be implemented if the relevant tax treaty does not contain the equivalent of the second sentence of Article 25(2) of the OECD Model. Thailand therefore does not meet the minimum standard on implementation of MAP agreements.