Transfer Pricing Update: MNEs to File Country-by-Country Report (CbCR) in Thailand

Written by Mr. Phongnarin Ratanarangsikul
The Revenue Department recently issued Director-General’s Notification on Income Tax No. 408 (“DGN 408”). The new law requires multinational companies to prepare and submit a Country-by-Country Report (“CbCR”) in compliance with the Organization for Economic Co-operation and Development (“OECD”) and the Base Erosion and Profit Shifting (BEPS) framework.

Multinational enterprises (“MNEs”) with consolidated group revenue exceeding Baht 28,000 million for the previous 12-month accounting period must submit a CbCR, together with their corporate tax return (“Form P.N.D. 50”), to the Revenue Department.

DGN 408 is part of broader disclosure requirements that attempt to establish international collaborations via exchanges of information among international tax authorities. The new requirement will become effective for taxpayers whose accounting periods start on and from 1 January 2021.

The author discusses the new requirement, what MNEs should expect, and preparing the CbCR.

Who Must Submit a CbCR?

DGN 408 mainly focuses on MNEs operating in more than one country by means of a subsidiary or permanent establishment, or by maintaining management control over sales of goods or services outside their tax residence.

The Revenue Department requires the following entities (“Reporting Entity,” under DGN 408) that have a consolidated group revenue exceeding Baht 28,000 Million in the previous 12-month accounting period to file a CbCR in English language along with their P.N.D. 50:
(1) ultimate parent company registered under Thai law; and
(2) the associate entity conducting business in Thailand on behalf of the foreign parent where:
  • no obligation to file a CbCR in the country where the ultimate parent is a tax resident; or
  • have international agreements on automatic exchange of information, but without competent authority agreement in which Thailand is a party or yet in effect as to the exchange of CbCR at the time of the reporting period; or
  • the reason of systemic failure of such information exchange network has occurred.
Where the ultimate parent’s country has no laws requiring that a CbCR be filed, it may appoint a surrogate (a constituent entity registered under Thai law) as the Reporting Entity to file the CbCR with the competent authority in Thailand, on its behalf.

Who Is Exempt from Filing a CbCR?

According to DGN 408, the associate entity operating in Thailand on behalf of the ultimate parent will be exempt if the:
  • ultimate parent has appointed a surrogate to file a CbCR in the tax residence of the surrogate (other than Thailand);
  • surrogate’s tax residence requires that a CbCR be filed in that country;
  • surrogate’s competent authority has agreement on exchange of CbCR with Thailand in effect before the CbCR filing deadline in Thailand,
  • competent authority of the surrogate’s country did not notify the reason of systemic failure of that information exchange network to the competent authority of Thailand; and
  • surrogate has notified the competent authority in both Thailand and its tax resident of its appointment.
Complying with DGN 408

The Revenue Department is empowered to request CbCRs from ultimate parent companies starting from the next 12-month accounting period commencing in FY2022. If requested, the ultimate parent company must submit to the Revenue Department its CbCR together with its P.N.D. 50.

CbCR Form

The ultimate parent company may refer to the CbCR model template in DGN 408 and in the OECD’s Country-by-Country Reporting XML Schema as guidance to collect and organize data. Required information includes operating jurisdictions, revenues from unrelated and related parties, profits, taxes, number of employees, assets, and functions, risks, and assets of each entity relevant to the MNE. (See attachment)

Author’s Note:

Be proactive, not reactive.

Taxpayers must stay aware of this requirement, prepare for the likelihood of questions and issues with the Revenue Department, and have the required transfer pricing documentation at least organized and accessible for purposes of filing.
In summary:
  • The ultimate parent company a Thai MNE whose consolidated group revenue exceeds Baht 28,000 million in the previous 12-month accounting period must file a CbCR together with its P.N.D. 50.
  • DGN 408 provides rules and conditions for conversions of currency for the relevant period in reference to the information provided by the Bank of Thailand.
  • MNEs not required by their own tax residence to file a CbCR, but that have a Thai associate entity that meets the conditions under DGN 408, must file a CbCR or may appoint a surrogate to comply with Thai law.
  • Taxpayers must start reviewing the CbCR model template in order to be well-prepared for the needed documents and to ensure consistency of data disclosed among the Disclosure From, Master File, Local Files, and CbCR.