New law set to improve transfer pricing rules in Thailand

28 September 2018

The introduction of the new law is set to mark a significant step towards the development of transfer pricing rules in Thailand.

Approved by the National Legislative Assembly on 27 September, it requires certain companies to submit details of transactions with related parties to the Revenue Department as part of their annual corporate income return.

“Although the Thai Revenue Code already has express provisions in Section 65 bis (4) requiring the taxpayers to follow market-driven prices while undertaking any transaction,” according to Bhrigu Dhingra, the head of the transfer pricing team at BDO in Thailand, “the introduction of the new transfer pricing legislation indicates the Thai government’s serious effort to align itself with the growing trend of greater scrutiny and heightened reporting requirements among an increasing number of countries on the transfer pricing front.”

Companies or registered partnerships whose turnover for the relevant fiscal year does not exceed the prescribed threshold (to be defined later through a ministerial regulation), which will not be less than THB200 million, will be exempt from the requirement to prepare the report.

These new regulations will apply for accounting periods starting on or after 1 January 2019.

Many uncertainties on the interpretation and practical application of the provisions in the law remain, however, and further guidance will be issued by the Thai tax authorities through ministerial regulations.

“It therefore becomes imperative for taxpayers to undertake a thorough analysis of their transactions from a transfer pricing perspective before engaging in any related party transactions or to review their transfer pricing policies to take into account any changes in circumstances that would affect the transfer price agreed,” says Dhingra, adding that  Departmental Instruction No. Paw 113/2545 requires taxpayers to prepare transfer pricing documentation concurrently during each stage of a transaction.