If a company has related companies (Related Co.), Thai transfer pricing law mandates two main responsibilities:
1. Prepare and submit the list of Related Co., total value, and other information regarding transactions with Related Co in the form of a Disclosure Form within 150 days after the end of the fiscal year (same timing as the submission of Form PND. 50). The submission must be made through the website of the Revenue Department or the Ministry of Finance only. Even if (1) the relationship with Related Co did not exist throughout the tax year, such as newly registered companies, newly purchased or sold shares of Related Co, and (2) there were no transactions with Related Co in that tax year, the company must still submit the Disclosure Form [Section 71 Tri, Paragraph 1].
2. Prepare and submit documentation showing the necessary information for analyzing transfer pricing between the company and Related Co, following the guidelines of the Director-General's Notifications No. 400 and 407, commonly known as the "Local File" (according to Action 13 of the OECD/G20 Base Erosion and Profit Shifting Project). If viewed pessimistically (but realistically), When already received the information in the Disclosure Form, the officials have 5 years to analyze and identify targets in the risk group to issue a request for the Local File and additional evidence for tax assessment. When the company receives a notice from the officials, it must comply within 60 days. If there are reasonable grounds, the time can be extended up to 120 days. And a special promotion for those receiving the first request for documents allows preparation and submission within 180 days [Section 71 Tri, Paragraph 2].
Additionally, Section 71 Tri, Paragraph 3 states that “This section shall not apply to…” companies with income from business or due to business not exceeding THB 200 million in that tax year. Therefore, companies that meet this criterion are not required to submit both the Disclosure Form and the Local File. The immediate question that follows is: Does this mean companies with income not exceeding THB 200 million will not be subject to transfer pricing tax audits? The straightforward answer is “No.” These companies are still required to set transfer prices according to Section 71 Bis, Paragraph 1. Worse still, officials may audit taxes using general provisions (Sections 65 Bis and 65 Tri), which could put companies in a more difficult position than using transfer pricing laws. This issue will be discussed in detail after finishing the topic on related companies.
Caution: If a company fails to submit the report (i.e., Disclosure Form) or documentation (such as Local File or other information requested by officials) or submits but provides incorrect or incomplete information without reasonable grounds, it will be subject to a fine not exceeding THB 200,000 (Section 35 Tri).
[Contact Person: Mr. Phongnarin Ratarangsikul | Partner]