Thailand

Group taxation is not permitted in Thailand.

Transfer pricing

The transfer pricing rules adopt the arm’s-length principle. Revenue officers can uplift or reduce taxpayers’ revenue and expenses to reflect arm’s-length conditions. Where transfer pricing adjustments result in a tax shortfall, a secondary adjustment that arises from imposing tax on a constructive transaction, either in the form of a deemed dividend or deemed loan, would also apply.

Taxpayers belonging to a group of companies are subject to annual transfer pricing reporting requirements. Entities with an annual total revenue of THB 200 million or less are exempt from these reporting requirements.

Transfer pricing reporting consists of the following:

• A transfer pricing disclosure form, which must be submitted online within 158 days following the financial year-end.
• Full transfer pricing documentation, which must be prepared and maintained for five years from the date of filing the transfer pricing disclosure form, and submitted to the Revenue Department within a prescribed time period (normally 60 days, extended to 180 days for the first-time request).

Penalties of up to THB 200,000 in cases of non-compliance may apply for each reporting requirement, including inaccurate or incomplete disclosure of information).

The detailed content requirements of the transfer pricing local file are broadly aligned with the OECD guidelines. However, no specific content requirements for the master file have yet been formally prescribed. Transfer pricing documentation must be submitted in Thai.

The transfer pricing disclosure form is used by the Revenue Department for risk assessment and targeted audit selection. Where a taxpayer is selected for review, the revenue officers will request the full transfer pricing documentation. If the transfer pricing practices adopted by the taxpayer are not consistent 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 THB 200 million or less are exempt from the transfer pricing reporting requirements, they are still obligated to ensure that their transfer pricing practices are at arm’s-length.

Thailand also has country-by-country reporting (CbCR) requirements. Multinational enterprises (MNE) groups with total consolidated revenues exceeding THB 28 billion and carrying on business in Thailand are required to file the CbC report in Thailand, if they do not meet the local filing exemption conditions. A Thai entity may be designated as a surrogate parent entity and file a CbC report on behalf of the group, with certain conditions to be met.

The CbC report is required to be filed online within 12 months from the financial year-end in the case where the ultimate parent entity of a Thai MNE is the filing entity, or within 60 days upon request in the case where the filing entity falls under the local filing conditions. Each MNE group operating in Thailand and meeting the CbCR threshold must select a representative entity to file a CbC notification online with the Revenue Department. A fine of THB 2,000 may apply for late filing of the CbC report.

The transfer pricing rules endorse the use of five transfer pricing methods in determining the arm’s-length compensation for a controlled transaction, which are the comparable uncontrolled price, resale price, cost plus, transactional net margin, and transactional profit split methods.

Other pricing methods may only be used in cases where it can be proven that the five endorsed methods are inappropriate. In such cases, written notification must be submitted to the Director-General of the Revenue Department, together with supporting documentation to justify the alternative method, which should be ready for submission to the revenue officers upon request.

The regulations also provide brief guidelines for benchmarking, requiring taxpayers to consider internal comparables (i.e., the same or similar transactions that a taxpayer has with unrelated parties) before external comparables (i.e., the same or similar transactions between independent third parties). Although not explicitly stated in the regulations, the use of one-sided methods for external benchmarking, with the Thai entity as the tested party, requires the use of local comparables.

Some ambiguity remains around the interpretation of ‘relationship’ and ‘control’ under the definition of ‘related parties’ in the main provision. Further guidance on the interpretation is expected in the pending subordinate regulation.

Thailand provides mechanisms to resolve, or even prevent, transfer pricing disputes through Mutual Agreement Procedures (MAPs) and bilateral Advance Pricing Agreements (APAs). These are available to Thai entities engaged in cross-border transactions with related parties in treaty partner jurisdictions.

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.