Over the past few years Thailand has moved towards creating a framework for addressing transfer pricing. In 2015, a draft version of new transfer pricing laws were approved by the Thai Cabinet and forwarded to the National Council of State for review and revision. In 2017, the revised draft was released for public hearing, and a final draft has been approved by Thai Cabinet on 3 January 2018. It is expected that the final draft will become law in early 2018 and will apply to accounting periods starting from 1 January 2017 (thus the first companies subject to the new law would be those with a fiscal year running from 1 January to 31 December 2017). While a full draft of the proposed law is not yet publicly available, certain key points approved by the Thai Cabinet have been disclosed as follows:
- Mandatory reporting by companies and partnerships.
Companies and partnerships in Thailand that have “related parties” (to be defined) will be required to prepare a report describing the relationship between their related entities and the value of related party transactions during the accounting period in a format to be prescribed by the Director-General. The report will be submitted to the assessment officer along with the annual tax return filing. Companies and partnerships with an annual income not exceeding a minimum threshold (to be prescribed in a Ministerial Regulation) will be exempted from the reporting requirement.
- Information requests from assessment officer.
Subject to the Director-General’s approval, the assessment officer reviewing the report will be allowed to require the reporting entity to submit additional documents or evidence showing details of the reporting entity’s transfer pricing policies going back as far as five years prior to the date of the report’s submission.
- Adjustments to tax liabilities.
In the event the assessment officer discovers that the reporting entity has engaged in improper transfer pricing, it will be empowered to adjust the reporting entity’s income and expenses with its related parties to determine the reporting entity’s “true” tax obligations.
The above are just a few of the key points under the proposed law, and it will be interesting to see how the new law defines improper transfer pricing and the penalties that will apply to those entities found to engage in improper transfer pricing activities. Watch this space as more details become available.