How Country-by-country reporting (CbCR) regulations are evolving in Thailand

HLB Thailand Transfer Pricing Team


The Thai Revenue Department (TRD) has recently released draft rules for the country-by-country report (CbCR or CbC report) for public consultation.

These rules make the CbC report effective in Thailand for accounting periods commencing on, or after January 1, 2020, so taxpayers need to familiarise themselves with the proposal.

The changes have come about as part of Thailand’s commitment to implement the OECD/G20 BEPS project outcomes. This is a significant development for Thailand, which informs the world that it’s serious about tackling BEPS.

The draft rules spell out the definitions as provided by the 2017 OECD Transfer Pricing Guidelines for enterprise groups, multinational enterprise (MNE) groups, constituent entities (CE), ultimate parent entities (UPE), and surrogate parent entities (SPE).

Taxpayers are provided guidance on matters, such as who is impacted by this law, what the filing obligations are, the format of CbCR, the means of filing the CbC report and the timelines.

Which entities are subject to CbCR?

Any entity that satisfies one of the following criteria, and has consolidated group revenues of no less than THB 28 billion (approx. USD 925.6 million) in the immediately preceding accounting period, is obligated to prepare and submit a CbCR.

If the accounting period of the preceding year is less than 12 months, the revenue threshold will be calculated proportionally to such an accounting year. For example, if the accounting period of the immediately preceding year was from January 1, 2020 – June 30, 2020, the revenue threshold would be THB 13,923.50 million (THB 28 billion x 182/366 days).

General cases

  1. A Thai headquartered (HQ) MNE group – an entity registered under Thai law and is the UPE of the group, or the SPE as appointed by the UPE to file the CbC report in its tax jurisdiction, as required.
  2. The SPE registered under Thai law – as appointed by the group to file the CbCR on behalf of the group.

Specific case

An entity that does not satisfy conditions one and two of the general cases, but is carrying on business in Thailand (foreign MNE subsidiaries) and meets one of the following conditions:

  1. A foreign UPE of the MNE group (located outside of Thailand) that does not require the UPE to file a CbC report in its tax jurisdiction and the UPE does not appoint the SPE in the jurisdiction that requires surrogate parent filing of the CbC report;
  2. If the foreign UPE of the MNE group or SPE, located outside of Thailand, does not have a qualified competent authority agreement (QCAA) with Thailand, or such QCAA is not yet effective at the last day of the CbC report submission period; or
  3. The TRD has been notified of the systematic failure from the residence jurisdiction of the UPE or SPE.

Reporting deadline

If the above threshold and conditions are met, the Thai-based UPE or SPE must prepare and submit the CbC report within 12 months (in a general case) of the last day of the financial reporting year. For a specific case, the report must be filed within 60 days of being requested by the TRD.

Reporting format

The CbCR report should be in English and filed electronically. It should follow the CbC report XML Schema as prescribed by the OECD. The currency used when preparing the CbC report would be the functional currency of the UPE.

Below is an illustrative chart that assumes the reporting entity has a December 31 year-end, summarising the CbC report timelines:

Assessing the impact of the draft rules

It can be argued that the most significant impact is felt by Thai HQ MNE groups which are required to prepare and file a CbC report for the first time as a result of the new rules. The draft rules are mostly in-line with the OECD.

For the MNE groups with UPEs located outside of Thailand, operating within Thailand, the new rules provide flexibility and allow for CbC reports (FY2020 and onwards) to be filed in Thailand.

Although Thailand has signed the multilateral competent authority agreement (MCAA), it is yet to activate any exchange relationships with other tax jurisdictions. Nevertheless, it is expected that these will be activated to enable the exchange of data/information with other tax jurisdictions automatically.

There are still many unanswered questions, such as whether a local filing is required for previous years (in case the Thai group was subject to CbCR in other countries), notification requirements, or how to address different year ends to arrive at a consolidated group revenue.

It is expected that the TRD will release formal guidance on areas discussed above to implement the rules effectively.

It is an opportune time for MNEs to evaluate their transfer pricing risks and ensure that their policies properly allocate profits to the various jurisdictions in which they operate.

HLB’s Transfer Pricing specialists are here to help. 

Thailand’s transfer pricing rules are complex, and can differ greatly from those in neighbouring countries. To stay compliant, book a meeting with Rohit Sharma and his team of local transfer pricing experts at HLB Thailand today. 

Download Article published in International Tax Review

Rohit Sharma

Principal, Transfer Pricing


How Do I Become Compliant in Transfer Pricing?



It’s not just about becoming compliant, it’s about staying compliant and for this there can be little doubt that you’ll need a skilled pair of hands to guide you through the myriad processes and procedures. As we’ve mentioned before, it’s one thing to have all of your transfer pricing documentation in place, but it’s an entirely separate thing to be compliant with. The documentation is, as always, just the first line of defence, but there’s plenty more you can do to ensure you’re not on the receiving end of an unpleasant visit from the Thai Revenue Department.

For the sake of chronology, let’s begin at the beginning. You’ll need to conduct a thorough and unsparing functional, asset and risk analysis. Now, it’s worth bearing in mind that the very concept of risk has evolved in line with developments from the OECD’s BEPS Action Plans, but the types of risk you’ll be expected to cover in your analysis include market risk, risk of loss associated with an investment in and use of material assets, risks inherent to research and development, financial risks that range from foreign exchange rates and interest rates to changing domestic and international legislation – the list goes on.

Read more: The impact of COVID-19 on your Transfer Pricing arrangements

Essentially, to establish transfer pricing in keeping with the Arm’s Length Principle a functional analysis is necessary to help determine which companies in a group of companies control which functions. If an intra-company transaction is to happen, first you must establish which company does what, who is providing what assets and therefore assuming the risks associated with the transaction. Think of this as a structural breakdown of the group, with a detailed listing of roles played by all companies involved in the transaction. 

A well thought through functional analysis is one of the first steps you can take on the long road to becoming compliant in the eyes of the Thai Revenue Department, but it’s by no means the last. While a functional analysis gives the authorities a sense of where the value lies within the group’s supply chain and can help give a broad overview of all the companies involved in the transaction, the economic analysis will further guide you towards compliance.

Conducting your economic analysis is effectively like showing the working out in a maths test, you must show the transfer pricing methodology you chose to work out your benchmarking. Benchmarking is crucial – it shows that you’ve studied similar transactions to the one you’re entering into and that yours will be comparable to one conducted between two wholly unrelated companies. 

Read more: Everything you’ve ever wanted to know about Transfer Pricing in Thailand (with examples)

Not only do you need to show the method you chose, along with why you chose it, but you’ll need to explain why other methods were unsuitable for your transaction. Keep in mind that when you’re benchmarking, the Thai Revenue Department prefers it when you benchmark your transactions against those carried out by local companies rather than international ones.

Similarly, you’ll want to ensure you have a robust industry analysis to identify any relevant nuances of the market your company operates in and determine whether there may be any competitive advantages that need to be adjusted for. This means putting together an analysis of trends in your industry, big changes or challenges that have impacted the performance of the industry, as well as your company’s place within that industry – are you the market leader or a relative newcomer?

Read more: Which Southeast Asian Nations Have Adopted the OECD BEPS Action Plan 13?

The question of your performance against that of your peers – particularly those of a similar size – could raise a few eyebrows at the Thai Revenue Department. If they deem there to be significant differences between the revenues your company is generating and those of other similar companies in the same industry, then there’s a good chance they’ll want to understand precisely why your company is not performing as well. They may even suspect profit shifting if the gulf between you and your competitors is large enough and there’s no viable explanation, so keep that in mind.  

Read more: Year-end transfer pricing adjustments and customs valuations

Now, remember the economic analysis? Well, you’re going to need to take the results from that analysis and apply them in financial analysis. This particular analysis will compare the prices agreed upon between the companies in your group and again check to ensure they’re within the range established by the Arm’s Length Principle – this will be done by checking against a financial index. Here is where you’d need to make any reasonable adjustments if there are factors that differentiate the prices agreed upon in your transaction and those of similar transactions by comparable companies.

So this covers a large part of the preparation you can do, but as much as this level of documentation – if done right – will provide some level of protection, you can always be more prepared when it comes to transfer pricing. 

Firstly, understanding the expectations of the Thai Revenue Department and being thoroughly up to date with all the changes in legislation before they come into effect is a key part of this. 

Assess your transfer pricing regularly – make sure key staff are aware of any changes that have taken place within the company that they ought to know about, as well as ensuring that you are always audit-ready. 

Remember, being compliant is far better than facing an audit and there is never a better time to start preparing than right now. 

You don’t need to provide documentation until requested by the Thai Revenue Department, but when that request finds you then the clock starts ticking and in Thailand as in any country, becoming compliant is not something you want to have to rush. 

For all of the analyses that you’ll be undertaking, just know that these do not guarantee your compliance in the eyes of the Thai Revenue Department, but without them, you are most certainly far more exposed than it would be wise to be. 

The key takeaway is to be prepared. If undertaking all of these means of protecting yourself when entering into a controlled transaction sounds like a lot, then get in touch with the people who know how to help and find a tailor-made solution that will get you as close to compliant as possible.

Get in touch

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Thailand clarifies rules for use of internal and external comparables

HLB Thailand Transfer Pricing Team

Thailand’s Ministry of Finance has issued a Ministerial Regulation under the Revenue Code prescribing the approach Thai tax officers should take when analysing and adjusting the pricing of transactions between related parties.

Ministerial Regulation 369 dated 6 November requires tax officers to first consider similar transactions that the taxpayer has made with third parties (internal comparables) if they are available.

If the taxpayer does not have comparable transactions with third parties, the tax officer shall then be required to use information concerning similar transactions between independent parties regardless of whether such transactions take place in or outside the country or are undertaken by domestic or foreign companies.

The regulation’s guidance on when to use internal and external comparables is a welcome move and is aligned with the OECD’s transfer pricing guidelines. Whislt its purpose is to provide instructions for tax officers to follow during transfer pricing audits, the regulation also assist taxpayers in determining the approach they should take to preparing their transfer pricing documentation.

The regulation gives the Director General of Revenue the power to issue further rules, procedures and conditions regarding its application. We expect that a clarification may be needed in the future on the circumstances in which foreign comparables will be acceptable, as the Thai tax office has previously expressed a strong preference for the use of Thai comparables.

Ministerial Regulation 369 also contains a very wide definition of “commercial or financial conditions”, that shall be used when considering whether such conditions made between related parties are different to those that would be made if they were operating independently of each other. The regulation then spells out the conditions that must be satisfied in determining that there has been a transfer of profit as a result of such difference in commercial or financial conditions.

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