Corporate - Group taxation

Last reviewed - 17 January 2021

Group taxation is not permitted in Thailand.

Transfer pricing

On 21 November 2018, Thailand introduced specific transfer pricing provisions into the income tax law. These provisions apply to accounting periods starting on or after 1 January 2019.

The transfer pricing rules adopt the arm’s-length principle. Revenue officers have the power to uplift or reduce taxpayers’ revenue and expenses to the arm’s-length price. Where the transfer pricing adjustments result in a tax shortfall, a secondary adjustment which arise from imposing tax on a constructive transaction, either in the form of a deemed dividend or deemed loans, would also apply.

The new legislation also requires mandatory annual transfer pricing reporting for taxpayers belonging to a group of companies (‘applicable taxpayers’). Entities with an annual total revenue of Baht 200 million or less are exempt from the transfer pricing information reporting requirements.

There are two levels of transfer pricing information reporting, as follows:

  • Partial disclosure: Applicable taxpayers are required to complete a transfer pricing disclosure form to be submitted to the Revenue Department at the time of filing the annual tax returns.
  • Full disclosure: Applicable taxpayers are also required to prepare full transfer pricing documentation to be maintained for five years from the date of filing the transfer pricing disclosure form. This includes the local file and the master file (for larger entities*), and is to be submitted to the Revenue Department within a prescribed time period (normally 60 days) from the date of the request.      

* Note: To date, the detailed requirements of the local file and master file have not been issued. An annual revenue threshold much higher than Baht 200 million is expected to apply for the master file obligation. Applicable taxpayers that do not meet this threshold will only be required to prepare the transfer pricing disclosure form and the local file to meet the reporting requirements.

The full transfer pricing documentation does not include the country-by-country report (CbCR), which will be administered under separate legislation which is currently in the drafting process and is expected to be issued soon.

A penalty of up to Baht 200,000 for each level of transfer pricing reporting will be imposed in the case where taxpayers fail to comply with reporting requirements (by way of inaccurate or incomplete disclosure of information).

The Revenue Department will use the transfer pricing disclosure form to select audit targets. Once selected, they will request the full transfer pricing documentation for review. In the case where the transfer pricing practices adopted by the taxpayer do not comply with the arm’s-length principle, Revenue officers will make the necessary adjustments and assess additional taxes, surcharges, and penalties.

Although smaller entities with revenue of Baht 200 million or less are exempt from the transfer pricing information reporting requirements, they will still be obligated to ensure that their transfer pricing practices are at arm’s length.

Not all the essential details have been included in the main provisions and regulations already enacted. As of December 2020, only the following subordinate regulations have been issued:

  • Details of transfer pricing disclosure form
  • Transfer pricing adjustments, and
  • The revenue threshold for exemption from transfer pricing information reporting.

The regulation on the transfer pricing adjustments also provides brief guidelines for benchmarking whereby internal comparables (i.e. the same or similar transactions that a taxpayer has with unrelated parties) must be considered before external comparables (i.e. the same or similar transactions between independent third parties).

Nevertheless, the Ministry of Finance and the Revenue Department are both in the process of preparing to issue further subordinate regulations and notifications to provide additional clarification and detailed rules for implementation guidance. We expect to see guidance on situations of non-compliance with the arm’s length principle, details of transfer pricing documentation requirements (including master file revenue threshold) and benchmarking in the pending subordinate regulations.

The Revenue Department will still be able to assess tax on transfer pricing irregularities for periods that started before 1 January 2019 as the statute of limitations in this case is five years. For those periods, the general income tax provisions, which require taxpayers to transact at market price, would be referred to. The transfer pricing documentation should then follow the current transfer pricing guidelines and be prepared and submitted upon request on a voluntary basis.

Thailand accepts bilateral advance pricing agreements (APAs) and limits the period covered to a maximum of five accounting periods. Only a company or partnership incorporated in Thailand that enters into intra-group transactions with affiliates who are residents of Thailand’s treaty partners may apply for an APA.

Thin capitalisation

There are no thin capitalisation rules. However, for certain businesses or as part of the conditions for granting tax incentives, a certain debt-to-equity ratio may be required.

Controlled foreign companies (CFCs)

There are no tax provisions in respect of CFCs.