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Thailand's New Transfer Pricing Legislation Close to Final Approval

The Thai government has completed its consultations on new transfer pricing legislation, and the legislation will now go to the National Assembly (parliament) for final approval. The legislation, which was first approved by the Thai Cabinet in May 2015 (previous coverage), will serve to further formulize transfer pricing requirements in the country. Currently, general transfer pricing rules are provided through various provisions and guidelines. Specific transfer pricing provisions that will be introduced include:

  • The tax authority will be explicitly allowed to adjust reported income or allowed deductions when it is determined that a related party transaction was not entered into under commercial and financial conditions that would be entered into by independent parties;
  • Related parties are defined to include when an entity directly or indirectly holds at least 50% of the total share capital of another entity; when a common shareholder or partner directly or indirectly holds at least 50% of the capital in two (or more) entities; and when entities are otherwise related by capital or management, or where one controls the other;
  • Taxpayers are allowed to claim a tax refund that may arise following an adjustment, which must be claimed within three years of the relevant tax return deadline or within 60 days of the adjustment notice;
  • An annual disclosure requirement will be introduced for information on related party transactions for the year, which will be due by the annual tax return deadline (a minimum income threshold will be set for this purpose);
  • The tax authority will be allowed to request transfer pricing documentation within five years following the deadline for the annual disclosure, with documentation to be submitted within 60 days of request, with a possible extension of up to 60 days;
  • A penalty of up to THB 200,000 will be introduced for failing to comply with the disclosure and documentation requirements, including for the submission of incomplete or incorrect information.

Additional details will be published after the transfer pricing legislation is approved and enacted.

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