Global Tax Alert (News from Transfer Pricing) | 10 June 2015

Thailand releases draft transfer pricing act

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Executive summary

On 7 May 2015, the Thai Cabinet approved the draft transfer pricing act (draft Act) that will add specific transfer pricing provisions to the Revenue Code. In 2002, the Thai Revenue Department (TRD) issued internal departmental guidance, Departmental Instruction No. Paw. 113/2545 (Dl 113), to tax officials for tax audit purposes. The proposed provisions will provide better guidelines on implementation and enforcement of transfer pricing regime in Thailand.

One of the key aspects of the draft Act is a requirement for taxpayers to prepare and file a disclosure statement with descriptions of related party relationships and the transfer pricing methods used, with the tax authorities within 150 days from a taxable year-end, i.e., a due date of the corporate income tax (CIT) return filing. Failure to comply with the requirement may result in monetary penalties not exceeding THB 400,000 (US$ 12,000).

This Alert summarizes the key features of the draft Act.

Detailed discussion

Authority to assess transfer pricing adjustments

The TRD is granted full authority to make adjustments to taxable income and deductions associated with related party transactions that were not at arm's length. Two or more entities are related if they form a special relationship, whether directly or indirectly, with regard to ownership, management or control.1

Statute of limitations on tax refund claims for corresponding adjustment

To mitigate double taxation, taxpayers who have overpaid taxes on related party transactions as a result of transfer pricing adjustments can file a tax refund claim within:

  • 60 days after receiving notification of tax assessment, or
  • 3 years from the due date for filing the tax return

Disclosure statement requirements and penalties

Taxpayers are required to prepare and file a disclosure statement with the tax authorities within 150 days from the taxable year end, i.e., a due date of the CIT return filing. The required statement must include: (i) descriptions of relationships of relevant related parties in terms of ownership, management or control; and (ii) the method used in calculating transfer prices on related party transactions. Failure to provide the required disclosure statement or file incomplete or false statements in the disclosure statement will result in monetary penalties not exceeding THB 400,000 (US$ 12,000).

Endnote

1. Further guidelines on specified threshold such as a percentage of ownership have not been issued to date.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Corporate Services Limited, Bangkok
  • Papatchaya Akkararut
    +66 2264 9090
    papatchaya.akkararut@th.ey.com
  • Hirohisa Furuse
    +66 2264 9090
    hirohisa.furuse@th.ey.com
  • Su San Leong
    +66 2264 9090
    su-san.leong@th.ey.com
Ernst & Young LLP, Asia Pacific Business Group, New York
  • Chris Finnerty
    +1 212 773 7479
    chris.finnerty@ey.com
  • Kaz Parsch
    +1 212 773 7201
    kazuyo.parsch@ey.com
  • Bee-Khun Yap
    +1 212 773 1816
    bee-khun.yap@ey.com
Ernst & Young LLP, Asia Pacific Business Group, Houston
  • Trang Scott
    +1 713 751 5775
    trang.scott@ey.com

EYG no. CM5514