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12.4.3. Documentation Requirements

Disclosure Requirements

Prior to 2019, disclosure requirements with respect to related-party transactions were required under the Securities Exchange Commission rules and the Thai accounting body regulations. Effective 1 January 2019, taxpayers with THB 200 million or more related-party transactions annually are required to disclose information on related-party transactions in a disclosure form to be filed along with the annual corporate tax return (due within 150 days after the close of an accounting year). For accounting periods beginning on or after 1 January 2020, companies and partnerships are required to file the disclosure form electronically via the Thai Revenue Department or the Ministry of Finance website. Taxpayers are required to state reasonable grounds in case of physical filing of the disclosure form.

The transfer pricing disclosure is required to include the following information:

  • List of all related entities or partnerships located in and outside Thailand with the transactions undertaken;
  • Value of specified related-party transactions between the taxpayer and its related parties located in and outside Thailand, other income, purchases of raw materials/goods, acquisition of land, buildings, and equipment, other expenses (royalty/management fee/technical service fee/commission, interest) and balance of loan receivable and payable at the end of the tax year; and
  • Consolidated financial statements, information on the transfer of intangible assets to related entities and any business restructuring involving related parties during the accounting period, and impact on the financials.

The tax authorities can request additional documents or evidence related to the related-party transactions within five years from the date of filing the transfer pricing disclosure form. The taxpayer is required to submit the additional documents (i.e., transfer pricing documentation) within 60 days of the request, which may be extended up to 120 days. A 180-day extension is also available for taxpayers if it is the first time of receiving a request letter from the tax authorities.

COVID-19 Emergency Measures

In response to the COVID-19 pandemic, Thailand has extended the deadline for the submission of the annual transfer pricing disclosure up to 30 May 2022 for the tax year 2020 (originally due within 150 days after the close of an accounting year). Disclosures due from 23 May 2022 up to 30 May 2022 are provided an additional 8-days extension if the disclosures are submitted online.

Standard Documentation

Taxpayers are required to maintain transfer pricing reports and contemporaneous documentation in relation to their related-party transactions. Taxpayers are required to maintain a three-tiered transfer pricing documentation consisting of a Master file, a Local file, and a Country-by-Country (CbC) report.

Master File

The Master file is required to be filed within 60 days upon receipt of a notification from the tax authorities. Taxpayers can seek an extension for 120 days to respond to additional information requests as mentioned above.

Local File

The Thai Revenue Department has published revised guidelines for transfer pricing documentation that are effective for accounting periods beginning from 1 January 2021. The required documentation is similar to the OECD Local file recommendations and includes the following:

  • Information on the taxpayer required to prepare documentation, including:
    • the nature of the business, the management structure (local organization chart) including the number of workers, the value chain including key trading partners and key competitors, the business strategy, and the economic situation;
    • the relationship structure of related parties with which controlled transactions are entered into (for which documentation is required), as well as information on shareholders of the taxpayer;
    • explanation of business restructuring involving the taxpayer and related parties, including a description of any impact (differences) on business operations, strategies, etc. as a result of such restructuring; and
    • a description of the transfer of intangible assets to or from the taxpayer with related parties, including the impact on operating results.
  • Documentation on the controlled transactions, including:
    • details of controlled transactions including the counterparty, the country/jurisdiction of the counterparty, and the amount received from or paid to the counterparty;
    • a description of the transfer pricing policy for each type of controlled transaction, including the assumptions applied;
    • a list of all contracts related to each type of controlled transaction, together with a summary of the important aspects of the contracts including the terms of the contract price;
    • an analysis of the functions, assets, and risks of the taxpayer and the counterparty for each type of transaction, including changes in the functions, assets, and risks from prior accounting periods, if any;
    • the financial information used to implement the pricing method chosen for each type of controlled transaction;
    • the transfer pricing method used by the taxpayer for each transaction type, including an explanation of the reasons for choosing such method and not choosing any other approved pricing method and the selection of the tested parties, if applicable; and
    • a list and description of selected comparable uncontrolled transactions and financial indicators of independent companies, including a description of the method and source of the information (i.e., benchmarking analysis).
  • Documentation or evidence other than the above may be requested by the revenue authorities to examine whether arm's length conditions are met.

It is clarified that taxpayers required to prepare transfer pricing documentation are not required to prepare a benchmarking analysis where:

  • Income in the accounting period does not exceed THB 500 million;
  • No controlled transactions are carried out with companies subject to a different corporate tax rate;
  • No controlled transactions are made with non-residents; and
  • No losses are carried forward from prior years.

Documentation requirements may also be relaxed where the taxpayer has entered into an advance pricing agreement with the tax authority.

Country-by-Country (CbC) Reporting

The Thai Revenue Department published Notification No. 408, prescribing Country-by-Country (CbC) reporting requirements for MNE groups in Thailand. The CbC reporting requirements apply in Thailand for accounting periods beginning on or after 1 January 2021.

The requirements apply to MNE groups with a consolidated group revenue exceeding THB 28 billion in the preceding year. The CbC report is required to be filed within 12 months after the close of the relevant accounting period. The first primary CbC reporting is due by 31 December 2022.

The primary reporting obligation falls on the ultimate parent entity of the MNE group if resident in Thailand.

A secondary filing obligation applies to local non-parent constituent entities if:

  • The ultimate parent entity is not resident in Thailand and is not required to file a CbC report in its jurisdiction of residence;
  • The ultimate parent’s jurisdiction of residence has a current international agreement with Thailand for the exchange of information but does not have a qualifying competent authority agreement in effect with Thailand by the time the CbC report is due; or
  • An agreement is in place, but there has been a systemic failure for the spontaneous exchange of CbC reports by the ultimate parent’s jurisdiction.

The ultimate parent entity may designate one of the constituent entities as a surrogate parent entity to file the CbC report and notify the Thai tax authority that the filing is made on behalf of all the constituent entities in Thailand, provided the accounting periods for the surrogate parent entity and the ultimate parent are identical and there is no requirement for the ultimate parent to file a CbC report in the country where it is a tax resident. In such cases, secondary filing by a local constituent entity is not required.

The surrogate parent entity must file the CbC reports of the MNE group, within 60 days after the receipt of notice from the tax authority. The following conditions are required to be satisfied:

  • The surrogate parent’s jurisdiction requires the filing of CbC reports conforming to the requirements of the Thai tax regulations;
  • The surrogate parent’s jurisdiction has a qualifying competent authority agreement with Thailand on or before the CBC report filing deadline and has no incidence of a systemic failure;
  • The surrogate parent entity has notified its jurisdiction of tax residence that it is designated as the surrogate parent on behalf of the MNE group; and
  • A notification has been filed with the Thai tax authority providing details of the surrogate parent entity.

Where the CbC report is required to be filed locally in Thailand, the contents of the CbC report must include the following for each jurisdiction:

  • Table 1:
    • revenues (unrelated parties, related parties, and total);
    • profit (loss) before tax;
    • income tax paid (cash basis);
    • income tax accrued - current year;
    • stated capital;
    • accumulated earnings;
    • number of employees; and
    • tangible assets - other than cash and cash equivalents.
  • Table 2:
    • constituent entities resident in each tax jurisdiction (including Tax ID and address);
    • jurisdiction of organization or incorporation if different from jurisdiction of residence; and
    • main business activities of each constituent entity.
  • Table 3:
    • additional information or explanation deemed necessary to understand the CbC report.

The CbC report must be submitted in English using the standard OECD XML schema.

Language of Documentation

The transfer pricing documentation is required to be submitted in the Thai language. The documentation may be submitted in the English language with a translated version in the Thai language.

Penalties

Failure to comply with the disclosure and documentation requirements, including the submission of incomplete or incorrect information, attracts a penalty of THB 200,000.  

In the case of reassessments under a transfer pricing audit, a penalty ranging from 100% up to 200% applies to the tax shortfall. In addition, late interest at the rate of 1.5% per month (capped at 100% of the tax shortfall) is due. Penalties may be reduced by half or fully waived in case of voluntary self-adjustment by the taxpayer (but this relief does not apply to late interest). The preparation of transfer pricing documentation, whilst helpful to the taxpayer in the audit and defense stages, does not exonerate the taxpayer from the above penalties.