Thailand enacts new Transfer Pricing Act
Thailand’s Transfer Pricing Act was published in the Royal Gazette on 21 November 2018 and will be effective from accounting years starting on or after 1 January 2019.
The key features are outlined below:
1.This Act in effect adds content to the Thai Revenue Code -Sections 35 ter, 71 bis, and 71 ter.
2.Section 71 bis grants tax authorities the power to assess additional revenue and/or expenses on transactions between related parties, for the purpose of calculating corporate income tax in accordance with Section 65 or to adjust assessable income under Section 70 or Section 70 bis of the Revenue Code.
3.Section 71 bis defines related parties as two or more legal entities with the following relationships:
a.One party directly or indirectly holds 50% or more of the capital of the other;
b.The same shareholder directly or indirectly holds 50% or more of the capital of both parties;
c.The parties have a dependent relationship through participation in capital, management, or control of the other entity, as defined in the Ministerial Regulations.
4.To mitigate double taxation, taxpayers who have overpaid taxes as a result of a transfer pricing assessment made under Section 71 bis have the right to file a tax refund claim within 60 days after receiving the tax assessment notification or within 3 years from the tax return filing due date.
5.Section 71 ter states that, regardless of having related party transaction or regardless of the length of the relationship during the accounting period, related parties as defined under Section 71 bis shall:
a.prepare a report providing descriptions of the related party relationships and disclosing the value of related party transactions for each fiscal year in accordance with the specified format, and
b.submit the report to the tax authority within the timeframe specified in Section 69 of the Revenue Code (i.e., within 150 days from the closing date of the accounting period).
6.Within 5 years from the date of filing the report under Section 71 ter, the tax authorities with the approval of the Director General can request additional documents or evidence necessary to analyse the related party transactions. The taxpayer is required to submit the additional documents within 60 days after receiving a request letter.
7.In necessary circumstances, the taxpayer can request the Director-General to extend the due date from 60 days to 120 days from the request letter receiving date. In case taxpayers are receiving a request letter for the first time, they are eligible to request an extension of up to 180 days.
8.Taxpayers with annual revenue of less than THB 200 million are exempt from the Section 71 ter requirements to prepare and submit a report.
9.Under Section 35 ter a fine of not more than THB 200,000 will be imposed if a taxpayer does not file the required report per Section 71 ter or submits incomplete/ incorrect documents without justifiable reason.
Further measures will be stipulated in related Ministerial Regulations, which have yet been announced at this stage.
Source: EY Tax Alert dated 22/11/2018 from EY Thailand Website