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Thailand’s transfer pricing disclosure form (“TPDF”) is a type of risk assessment tool used by the Thai Revenue Department (“TRD”) to track the transactions of the Thai businesses that have an annual revenue of at least 200 million Baht for the financial year. The businesses that meet the threshold must prepare the TPDF even if they do not have any related party transactions.
The TPDF must be submitted along with annual Corporate Income Tax (“CIT”) returns, within 150 days of the end of the financial year. A penalty of up to 200,000 Baht may be imposed on businesses that fail to submit this form accurately and on time. Moreover, if a tax official decides that a business has under/overcounted its related party transactions, the tax official can adjust the tax requirements for that business as deemed necessary. Here, as elsewhere, it pays to know the law.
The basis for the TPDF is the Revenue Code Amendment Act No. 47, implemented in 2018. An updated official disclosure form was subsequently introduced in November 2019, based on Section 71 bis and Section 71 ter of the Thai Revenue Code. Ministerial Regulation #369, introduced in November 2020, empowers tax officials to adjust the revenue and/or expense of the businesses, if and when the business’ profit shifting between related parties is proven.
The TPDF must be prepared by the businesses (with or without related party transactions) with revenue of 200 million Baht or more during the financial year. Companies with lower revenues are exempt from the TPDF requirement, but the tax official may still request a transfer pricing documentation (“TP report”) to be submitted if the business has made significant related party transactions during the financial year. Businesses requesting a tax refund are often asked to submit a TP report as well, even if their revenue is below the threshold of 200 million Baht.
The businesses that have received tax incentive privileges from the Thai government bodies are required to prepare separate TPDF as per their annual CIT returns. The TPDF can be filed manually or electronically, though it must be submitted with CIT returns.
The aim of the TPDF is to disclose each businesses’ domestic and oversea related parties, related party transactions during the financial year, along with the value of each transaction. TRD is particularly interested in discovering whether profits have been shifted to other jurisdictions, resulting in lower tax payments in Thailand.
For each related party transaction, therefore, companies must disclose the nature of the transaction and its value. Each transaction must be accounted for, with service fees and interest figuring into the calculation.
It is also important for businesses to know which party is paying the withholding tax as it can affect the TPDF totals, and therefore must be double-checked to confirm that accurate numbers are being reported to the authorities through TPDF.
Businesses should also be aware that the tax officer reviewing their TPDF has the right to request information, and especially related party transaction documents, going back for a period of up to 5 years.
Although the above requirements may seem onerous, a proactive method to preparation allows businesses to hit the target with relative ease. There is a big difference between suddenly discovering a looming deadline, then scrambling to meet it – and calmly organising one’s books over the course of the year, to satisfy expected obligations.
The former approach is far more likely to result in mistakes and oversights, which in turn could lead to costly penalties and further TRD scrutiny. By handling TPDF in a responsible and informed manner, your business can sail smoothly ahead and keep its overall focus on matters more central to its core mission.
If your business would like assistance with the transfer pricing disclosure form and its related requirements, contact Grant Thornton in Thailand today.