In light of recent global transfer pricing trends, the Thai government has been increasingly focused on transfer pricing. There has been significant progress in the transfer pricing regulations in Thailand which is a sign that the Thai government has taken a strong step in attempting to address transfer pricing issues. Thailand actually introduced transfer pricing guidelines in 2002 in the form of a Departmental Instruction No Paw 113/2545, which is not a law. The first draft of transfer pricing regulations was approved by the Thai cabinet in May 2015 and then passed to the National Council of State (Krisdika) which has been approved by Krisdika in the late 2016. On 19 June 2017, the Thai Revenue Department (TRD) issued an online public hearing with respect to the revised draft Transfer Pricing Act that will amend the Revenue Code. In this regards, the TRD has opened up to comments until 7 July 2017 on the revised Act. The purpose of the revised draft Act is to amend the Revenue Code to prevent tax evasion from transfer pricing applied between related parties, and to provide standardized guidelines on how to determine a market price in order to be in line with international standards and achieve fairness in taxation. The revised draft act will add new provisions (Section 35 ter, Section 71 ter, and Section 71 bis) to the Revenue Code.  

 

The key points in the revised draft transfer pricing Act are as follows: 

• The tax officer will be granted the power to adjust the assessable income and allowable deductions of an entity that entered into a transaction with another related entity under different commercial and financial conditions from a transaction between independent parties.
• The definition of the ‘Related Entity or Related Juristic Partnership’ is consistent with the Departmental Instruction No Paw 113/2545, plus it has been expanded to include at least 50% direct and indirect capital shareholdings.
• An entity with related party transactions who has income exceeding the threshold will be required to submit a report outlining the nature/relationship and quantum of related party transactions within the annual tax return filing deadline and submit the transfer pricing documentation within 60 days or the extended period of 120 days upon the receipt of notification from tax authority.  
• An entity may request a tax refund within three years from the tax return submission date or within 60 days after the receipt of an adjustment notification from a tax officer.  
• An entity that fails to comply with Section 71 ter or submits incomplete or incorrect documentation without reasonable explanation may be subject to a fine of up to 200,000 Baht.  

 

In anticipation of the imminent enactment of the transfer pricing regulations are enforced, it is recommended that taxpayers with related party transactions to  evaluate transfer pricing risks and take actions to address these before the enforcement of these regulations as well as to prepare the required transfer pricing documentation.