Thailand: Transfer pricing requirements and country-by-country reporting, effective 2021

The Thai Revenue Department on 15 October 2021 released guidance concerning the transfer pricing requirements with regard to country-by-country (CbC) reporting for accounting periods beginning on or after 1 January 2021.

The guidance is referred to as Notification of the Director-General on Income Tax No. 408 (dated 30 September 2021). 

A summary of the guidance reflects the following:

• The guidance on CbC reporting applies to multinational enterprise (MNE) groups that operate in more than one country through controlled entities, based on consolidated financial statements or permanent establishments, and that have total consolidated group revenue in the previous year of: (1) not lower than THB 28 billion (approximately U.S. $839 million) in a 12-month accounting period, or (2) not lower than a pro-rata of THB 28 billion in an accounting period of less than 12 months. If revenue is reported in other currencies, the amounts must be converted to THB based on the exchange rate (as announced by the Bank of Thailand).
• The report is to be in writing and in English.
• The report’s structure generally must follow the template for the CbC report (as proposed by the Organisation for Economic Cooperation and Development (OECD)) and must be filed in the XML schema format (also as specified by the OECD).
• The CbC report must be filed together with the annual corporate income tax return (form PND. 50) of the “reporting entity.” 

The following entities are “reporting entities” and thus are required to file a CbC report in Thailand:

• The ultimate parent entity (UPE) incorporated under Thai law
• A Thai associate enterprise of a foreign UPE that conducts business in Thailand, provided that the following conditions are met:
  • There is no requirement for the filing of a CbC report in the country where the UPE is a tax resident
  • The UPE’s country of tax residence does not have a Multilateral Competent Authority Agreement on Automatic Exchange of Information (MCAA) with Thailand for the respective reporting period, or
  • There is an incident of automatic exchange systematic failure
• A Thai associate enterprise of a foreign UPE can be appointed as the surrogate parent entity (SPE) to file the CbC report in Thailand on behalf of the UPE, if the following conditions are met:
  • There is no requirement to file a CbC report in the country where the UPE is a tax resident;
  • The UPE must prepare an SPE appointment letter and notify the competent authority in Thailand of such an appointment; and
  • The accounting period of the SPE must be the same as the UPE.

However, an associate enterprise conducting business in Thailand will be exempted from the obligation to file a CbC report in Thailand, if the following conditions are met:

• The UPE must appoint an SPE to file a CbC report in the country where the SPE is a tax resident (other than Thailand), and the SPE must notify its tax residence country of the SPE appointment;
• The country where the SPE is a tax resident has a local rule or regulation to require the filing of a CbC report in that country, has an effective MCAA with Thailand before the CbC report’s filing deadline in Thailand, and has no incident of automatic exchange systematic failure; and
• A Thai associate enterprise must notify the competent authority in Thailand of the SPE appointment.

The ultimate parent entity (UPE) is defined by the Thai rules as:

• An entity that has direct or indirect control of other entities within an MNE group that:

1)      Is required to prepare consolidated financial statements in accordance with the generally accepted accounting rules of the country where the UPE is a tax resident; or

2)      Is otherwise required to prepare consolidated financial statements if it was listed in the stock exchange of the country where the entity is a tax resident or in Thailand; and

3)      Is not controlled in the same manner by any other entities within the same MNE group

• An entity (other than (1) above) that conducts business through a permanent establishment in another country

The filing deadline for the CbC report in Thailand refers to the filing deadline for the annual corporate income tax return—that is, 150 days from the end of an accounting period. As tax professionals have observed, this filing deadline is more imminent than most countries which typically allow the CbC report to be filed within 12 months after the end of the UPE’s fiscal period.

In addition, even if the UPE of an MNE group does not currently prepare consolidated financial statements because it is not listed on a stock exchange, the UPE would still be subject to the CbC reporting rules by virtue of the deemed listing provision.

Because of this “tight” deadline for the filing of a CbC report in Thailand, prudent Thai reporting entities—such as a Thai UPE, an overseas MNE group that is considering appointing a Thai associated enterprise as its SPE in Thailand, etc.—would evaluate whether the threshold of total consolidated group revenue is met, especially if the MNE group previously has not prepared consolidated financial data or statements.

Note that with the submission of a CbC report, the tax authorities will have access to more financial data—not only of taxpayers in Thailand but also of taxpayers around the world in consolidated groups. Therefore, taxpayers need to consider conducting tax and transfer pricing risk assessments, as well as preparing supporting documents and explanations in advance, before submitting the CbC report (in particular, if there may be tax and transfer pricing inquiries and audits by the tax authorities).

Read an October 2021 report prepared by the KPMG member firm in Thailand