Key Takeaways
On 16 November 2020, the Ministry of Finance announced the Ministerial Regulation on Transfer Pricing No.369 (B.E. 2563 (2020)), titled “Adjustment of Income and Expenses of Taxpayers that Engage in Related-Party Transactions”. According to this Ministerial Regulation, it identifies the rules for Revenue officer to adjust or assess income and expenses of related parties subject to Section 65, Section 70 and Section 70 bis of the Revenue Code.
The related companies or juristic partnerships which settle particular commercial or financial conditions differencing from independent entities are believed to induce a transfer of profits, in case that it meets the following conditions:
❶ Establishing particular commercial or financial conditions which are applied to the related companies or juristic partnerships;
❷ Under the same circumstances, the commercial or financial conditions set forth therein differ from the conditions that could be applied to independent companies or juristic partnerships;
❸ The related parties establish commercial or financial conditions, thereby causing a transfer of profits between them through following mechanisms:
- Providing different prices and terms, or payment methods, for the goods or services;
- Providing different interest rates, financial service fees, or any kind of financial fees;
- Providing a difference in other kind of income or expenses.
The above-mentioned mechanisms are considered by comparing to unrelated party transactions under the same circumstances.
Conclusion
Previously, transfer pricing principle has been exiting in Thailand for several years. Notwithstanding, there may still be some obstacles in practice for the Revenue officers in adjustment or assessment of income of the related parties which could be received, and also expenses incurring among them which could be paid.
Announcement of this Ministerial Regulation No. 369 could be a significant change for transfer pricing law in Thailand as it prescribes the rules and conditions for the Revenue officer on income and expenses which can be assessed. This Regulation refers that the officer could perform adjustment by using an internal comparable approach, or an external comparable approach.
Recommended Actions
It can be seen that transfer pricing law plays a greater role in Thailand. From now on, there will be more laws, regulations, rules or government notifications on transfer pricing to regulate the related party, and establish the criteria for relevant authorities to adjust or handle with the related party transactions.
In the light of business operation, it is therefore recommended for the business which could be regarded as the related parties, or involved with the related party transactions, to prepare for developments of transfer pricing by establishing the business benchmarks to be in accordance with the laws, and prepare the measures to decrease the risks that probably occur.
We will keep on monitoring and share our valued opinions henceforward.
Reference
Ministerial Regulation on Transfer Pricing No.369 (B.E. 2563 (2020)), titled “Adjustment of Income and Expenses of Taxpayers that Engage in Related-Party Transactions” can be access at this link.
Should you have any further inquiries or require any assistance, please let us know.
Yours sincerely,
Somphob Rodboon
Managing Partner
Somphob.R@ilawasia.com
ILAWASIA Co., Ltd.
Jessupa Na Pomphet
Associate
jessupa.n@ilawasia.com
ILAWASIA Co., Ltd.
