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  • Thailand strengthens its transfer pricing rules

Thailand strengthens its transfer pricing rules

07 January 2019

The introduction of transfer pricing legislation marks a significant step towards the development of transfer pricing rules in Thailand.

New transfer pricing legislation has been introduced into Thailand’s Revenue Code, reflecting the Thai government’s serious efforts to align itself with international developments on the transfer pricing front.

The new law:

  1. Codifies transfer pricing rules and relief;
  2. Introduces mandatory transfer pricing documentation requirements;
  3. Mandates reporting of related party transactions by certain taxpayers;
  4. Imparts specific powers to assessment officers to impose transfer pricing adjustments; and
  5. Institutes a specific penalty regime for non-compliance. 


The Thai Revenue Code already has express provisions in Section 65 bis (4) requiring all taxpayers to follow market driven prices while undertaking any transaction. The newly enacted transfer pricing legislation codifies the arm’s length principle into the Revenue Code and imparts specific powers to assessment officers to impose transfer pricing adjustments in respect of either income or expenses arising from non-arm’s length transactions between related parties.

What is required?  

All taxpayers who enter into related party transactions are required to ensure that the transactions or arrangements are entered into on an arm’s length basis.

To substantiate their positions, taxpayers are required to be prepare transfer pricing documentation establishing the arm’s length nature of their related party transactions.

In addition, the legislation mandates for certain taxpayers with revenues exceeding a prescribed threshold (to be specified later by a Ministerial Regulation but not less than Baht 200Mn) to submit a a report of their related party transactions to the Revenue Department with their corporate tax return. 

What is the penalty for non-compliance?

The legislation empowers an assessment officer to adjust the income or expenses of companies or registered partnerships to the amount of income to be received or expenditure to be paid as if they were independent parties for the calculation of net taxable profit or assessable income for tax purposes.

Furthermore, non-submission of the required transfer pricing disclosure form within the prescribed period or provision of incorrect information without justifiable reasons may lead to the imposition of a penalty not exceeding Baht 200,000.

When does the new law take effect?

The new regulations apply to accounting periods starting on or after 1 January 2019.

What’s next?

Guidance on the interpretation and practical application of the new rules still needs to be issued by the Thai Revenue Department, which can be expected to cover matters such as comparability analysis, determination of arm’s length range, consideration of conditions for special transactions, etc.

Since joining the OECD’s Inclusive Framework on base erosion and profit shifting (BEPS), Thailand has committed to implement the four minimum standards of the BEPS package that includes application of BEPS Action Plan 13, which mandates a three-tiered transfer pricing documentation structure (Country-by-Country Report [CbCR], Master File and Local File). With the transfer pricing law now in place, the CbCR and Master File regulations are expected to be implemented soon. 

All businesses in Thailand — irrespective of their size — that have related party transactions should start evaluating their transfer pricing policies, to proactively identify any potential risk areas and take remedial measures.