On June 18, 2019, Thailand’s Ministry of Finance submitted draft transfer pricing guidelines to the Cabinet of Thailand (“Draft Guidelines”). This follows the enactment of the Thai Revenue Code in 2018, which stipulated transfer pricing documentation obligations for taxpayers in Thailand. The new Draft Guidelines aim to replace Departmental Instruction No. Paw. 113/2545 (“DI 113”) and will take effect for accounting periods starting on or after January 1, 2019.
The Draft Guidelines in general bring Thai transfer pricing practices into closer alignment with the Organisation for Economic Co-operation and Development Transfer Pricing Guidelines (“OECD Guidelines”), especially in relation to the available transfer pricing methods. Specifically, the original DI 113 allowed for use of only three traditional methods while the Draft Guidelines refer to all five transfer pricing methods outlined in the OECD Guidelines with no hierarchy indicated.
The Draft Guidelines also specifically make reference to intra-group service transactions and the need for a rigid application of the ‘benefit test’ as well as to the need to document transactions involving intangible property.
As the documentation requirement has been effective from January 1, 2019, it is expected that the Thai cabinet will soon review and finalize the Draft Guidelines. For Thai taxpayers with transactions exceeding Baht 200 million (~6.5 million USD), now is the optimal time to perform a transfer pricing review and to put a framework in place to manage your transfer pricing risks and documentation needs going forward.
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