January 2021 Thailand Tax Update

HLB Thailand Tax Team


Below you will find a summary of recent tax developments in Thailand plus a reminder of key reporting dates for employers in the next few months.

Social Security Contribution rate reduced to 3%

To provide relief from the impact of the Covid-19 pandemic, monthly contribution rates have been reduced from 5% to 3% for employers and employees for 3 months from January to March 2021.

The monthly wage base for contributions ranges from Baht 1,650 to a maximum of Baht 15,000 for each employee. The maximum contribution is therefore reduced to Baht 450 per month (normally Baht 750) from January to March 2021 for employers and employees. 

Reminder – upcoming employer obligations 

Employers are reminded to request details of deductions and allowances for the 2021 year from their employees (Form Lor Yor 01) for the purpose of computing income tax to be withheld from salaries and wages during the 2021 year.

Upcoming deadlines for reporting income paid to employees in the 2020 year are:

2021 workers compensation – important dates

Employers will be required to pay workers compensation premiums and make wages declarations as usual this year.

No extension planned for filing personal income tax returns

The Thai Revenue Department has no plans at the moment to extend the filing deadline for personal income tax returns for the 2020 year, according to news reports. The Revenue Department extended the deadline last year by 5 months. It believes the recent Covid-19 outbreak in Thailand will be contained in 2-3 months.

Personal income tax returns are due for filing by 31 March 2021, extended to Thursday 8 April 2021 for returns filed electronically.

Unemployment benefits

Unemployment benefits due to force majeure caused by the pandemic have been revised with effect from 19 December 2020.


Any questions?

If you would like to know more about the topics covered above please contact:

Duangnetr Sarachai: [email protected]

Radapak Arthapridi: [email protected]


Duangnetr Sarachai

Principal, Tax & Legal Services


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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Start the conversation

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.

Get in touch

Whatever your question our team will point you in the right direction

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The impact of COVID-19 on your Transfer Pricing arrangements

HLB Thailand Tax Team


The COVID-19 pandemic has had an abrupt impact on the world’s economy. Well over a year of economic development has been turned on its head as countries continue to  lockdown in a bid to contain the spread of the virus. 

The resulting economic fallout has had far-reaching effects on multinational groups (“MNEs”). Many are starting to question how they’ll address low or negative profitability, or changes in Transfer Pricing (“TP”) policies.

While TP may not be the first consideration for MNEs in responding to the pandemic, its importance will become clearer as groups start to restructure their business activities in response to the crisis.

Here are the critical TP areas that need to be dealt with during these unprecedented times.

Transfer Pricing Documentation (“TPD”) 

The Transfer Pricing Documentation (“TPD”) requirements are contemporaneous, meaning a taxpayer must use the latest available information and data to establish its Transfer Pricing.     

In Thailand, TP law is evolving, and currently lacks the proper guidance for tackling certain issues. For example, if a company with substantial related party transactions should begin reporting low or no profitability due to the economic impact caused by COVID-19, there are no local guidelines for the company to consider in preparing its TPD. 

It is therefore essential to focus on the guiding principles provided by the Organization for Economic Cooperation and Development Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD TP Guidelines”), which are mainly followed by the Thai Revenue Department and many other countries.  

In this case, MNEs may want to consider the following:

a. Increased focus on industry analysis  

Industry analysis requires the assessment of competition and supply and demand trends in the industry. It also assesses the competitiveness of the industry against other developed or emerging markets, and captures the use of intellectual property and technological developments in the industry. 

Furthermore, it highlights how credit works in the industry, and the exact impact of external factors. MNEs should intensify their efforts in constructing a detailed industry analysis of the impact COVID-19 has had on the industry, vis-a-vis, the facts and circumstances of taxpayers’ business.

b. Functional, assets and risk (“FAR”) analysis  

The FAR analysis should focus on functional and operational disruptions to support current business operations and subsequently the economic analysis.

c. Economic analysis  

Given the current circumstances, economic analysis is of significant importance. 

Below are a few critical points that should be incorporated into the TPD:

  • When it comes to selecting comparable businesses for benchmarking purposes, reassess the quantitative and qualitative filters used. For example, consider accepting loss-making companies (previously rejected on account of reported losses but are functionally comparable) and rejecting companies that are not affected by the current situation.
  • Consider using single-year benchmarking results only for comparison purposes. Adopting multiple-year benchmarking results – which is the normal approach – may not yield a proper reflection of the prevailing economic circumstances.
  • Accounting and capital adjustments – to enhance comparability, MNEs could consider adjustments for items such as fixed costs, foreign exchange fluctuations, working capital, unutilised capacity, inventory, risk, accounts payable and receivable, and exceptional items. 
  • Loss/special factor analysis – associated enterprises, just like independent enterprises, can sustain genuine losses, due to unfavourable economic conditions. Moreover, it becomes of utmost importance that such an analysis should be prepared to explain the economic and commercial impact of COVID-19 on the business.

Financing policies and cash flow management

Extraordinary times call for exceptional decision making in order to sustain or secure adequate cash flow. MNEs should consider the impact of its financing policies and cash flow management during this period, including:

  1. Reassess intra-group financing policies – in the short term, businesses within a group could consider accessing funds from the open market, where beneficial, rather than sources within the group.

Additionally, parent entities could provide support to group companies by extending explicit guarantees to access funds from third parties to address the short-term cash crunch (by providing subsidies or by not charging guarantee fees for such periods).

Existing intra-group funding arrangements could also be realigned or restructured. For example, by: 

  • Reducing interest rates on existing loans. 
  • Extending interest/principal payment terms, to assist group companies manage their cash flows.
  • Creating a framework for cash pool arrangements (if not followed presently), where group companies having excess funds could contribute for the benefit of other group entities in managing their working capital requirements (reducing time to assess funding options, lowering the cost of funding and minimising paperwork).
  1. To reduce the burden on the subsidiaries immediately, MNEs could also look to restructure or subsidise the following intercompany arrangements:
  • Management and/or technical assistance fees – absorb as a parent of the Group.
  • Subsidising the license or the royalty payments.
  • Volume discount or reduction in the actual product price to subsidiaries (especially in the case of low-risk distributors) 

Alternatively, the arrangements could be reviewed in order to increase intercompany charges in order to manage the group’s cash flows, while still remaining compliant with the Arm’s Length Principle.

Emergency management planning (supply chain) 

The COVID-19 pandemic has highlighted to MNEs the importance of business continuity plans to ensure smooth governance and operational effectiveness. 

By having a fallback model, a group, to some extent, would be able to manage short-term supply chain disruptions. It would also enable the group to rearrange an alternative subsidiary or a third-party supplier in case a specific company could not meet the demand. 

MNEs may need to consider the impact on their TP arrangements by switching to an alternative supplier or adopting other measures that weren’t previously anticipated.

Impact on overall operating model/business restructuring 

Changes to business operations in response to the COVID-19 pandemic may lead to a short term or temporary reallocation of functions between the various entities of a group. These may impact their current characterisation, and therefore the overall TP analysis for the group. 

If restructuring and reformulating TP policies is required, they should be documented from an economic and commercial standpoint (in the TPD), along with the corresponding tax consequences. 

An analysis of ‘options realistically available’ for MNEs to appropriately assess the impact of supply chain modifications to group entities, from a short and long term perspective, will be valuable in this context.

Impact on Master File (“MF”) and Country by Country (“CbC”) report 

The master file is a statement relating to the MNE’s global operations and activities, and the pricing policies relevant to Transfer Pricing within the MNE group.

Still confused about the Master File? Read: What’s the difference between a Master file and a Local file?

Country-by-Country (CbC) reports contain valuable information on the global allocation of the income, taxes paid, and the location of economic activity among tax jurisdictions in which an MNE group operates.

These reports are used by tax authorities to make high-level risk assessments of an MNE group to conduct informed TP audits. MNEs should focus on documenting explanations of changes that arise in their reporting compared to prior years.

Advance Pricing Agreements (“APA”) 

APAs made with tax authorities are an effective risk management tool to minimise disputes about the TP arrangements adopted. The arm’s length price/range proposed by the taxpayer uses past transactions to forecast future business profits and making so-called ‘critical assumptions’.

These critical assumptions generally don’t consider a change in economic conditions or the FAR of the counterparty involved in the transactions, or fundamental changes in the conditions of a particular industry. 

Taxpayers that have agreed an APA with the Thai Revenue Department should review the critical assumptions and assess whether the COVID-19 pandemic might trigger the need for consultation with the tax authorities, to renegotiate the agreed approach, or to revise or cancel the APA. 

Taxpayers who wish to apply for an APA in the current environment or are in the process of agreeing an APA, should carefully consider the critical assumptions and the period of the arrangements (normally an APA is made for 3-5 years).

COVID-19 and Transfer Pricing arrangements in Thailand

Thailand is a manufacturing and distribution hub for many MNEs. Usually, their subsidiaries operate in Thailand as low risk or routine businesses, meaning they perform routine functions and assume routine risks as compared to the entire value chain. 

The Thai Revenue Department would, therefore, expect a reasonable return on a year-on-year basis for such companies. If they report low or no profitability, such companies are likely to be challenged by the Thai Revenue Department. 

As such, these companies should document the reasons for the decline in their profitability in their TPD, showing whether such low or no profitability is caused by lower capacity utilisation, lower market demand, exceptional fixed costs, or other factors. 

The tax authorities may also question the financial position of the principal, in case the principal is not significantly impacted due to the COVID-19 outbreak. If not, the Thai Revenue Department may still demand a reasonable return for the Thai companies, as the principal enjoys the entire profits from the transaction. 

This is possible by making year-end TP adjustments. 

To find out more read our insights on year-end adjustments.

The burden of proof 

The sudden changes to the business environment in 2020 have presented serious challenges for businesses and governments alike as they adapt to new and uncertain economic conditions. 

It will be vital for MNEs to take a holistic approach as they start to address their TP policies, especially to assist in substantiating losses, the low profitability they may be reporting in the future, or the re-pricing/re-arranging of related party transactions/arrangements.

The burden will be on MNE groups to properly document the impact of COVID-19 on their related party transactions. The preparation and maintenance of Transfer Pricing documentation and related documents (invoices, agreements, emails, etc.) will facilitate reviews by the tax authorities and therefore help resolve any Transfer Pricing issues that may arise. 

Although the reporting of lower financial results overall should be expected, MNE groups can expect tax authorities to closely examine changes in financial results reported by group entities with related party transactions. 

Without properly prepared Transfer Pricing documentation to show that the transfer prices are at arm’s length, taxpayers are at risk of Transfer Pricing enforcement actions by tax authorities and double taxation arising from those actions.

If you want to learn more about Transfer Pricing, check out our article on Everything you’ve ever wanted to know about Transfer Pricing in Thailand (with examples).


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. 

Rohit Sharma

Principal, Transfer Pricing


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

HLB Thailand Transfer Pricing Team


The OECD first created the Base Erosion and Profit-Shifting (BEPS) action plan in 2016. Guidelines were initially adopted by 82 countries. Today, over 140 countries operate in line with the BEPS action plan. 

Many countries within the ASEAN Economic Community (AEC) have since introduced their  Country-by-Country report framework, as set out by the OECD. These include Country-by-Country Multilateral Competent Authority Agreements for the automatic exchange of information. 

Here’s our breakdown of Transfer Pricing in Southeast Asia.

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

Transfer Pricing guidelines in Southeast Asia


Vietnam’s economy is booming. Cheap labour costs are seeing the country become a popular manufacturing destination in Asia. To make sure all of this new business stays in check, the Ministry of Finance introduced its Transfer Pricing guidelines in 2017.

Transfer Pricing documentation should be maintained by Vietnamese companies with controlled transactions, to prove that pieces are at arm’s length. 

But bear in mind, if your revenue is below VND 50bn (approx. USD 2.2m) and transactions with associated enterprises are below VND 30bn (approx. USD 1.3m), you don’t need to worry about preparing Transfer Pricing documentation in Vietnam.


In recent years the Philippines has become an outsourcing hotspot, in part due to its substantial population of fluent English speakers. Naturally, the boom in multinational operations has raised widespread concerns about Transfer Pricing. 

The chance of an annual tax audit in the Philippines is high, and there are no set penalties for Transfer Pricing issues. General tax penalties under the NIRC and other relevant laws will therefore apply. Because these fines will be based on percentages, they can be quite high. 

Transfer Pricing documentation in the Philippines has become a requirement, and you’ll have to substantiate exactly how you’ve calculated the prices you charge for controlled transactions and calculate these prices as they happen, not at the end of the year

You can find out more about the Philippines’ Transfer Pricing regulations here.


Malaysia joined many of its other Southeast Asian neighbours by implementing its Transfer Pricing guidelines in 2017. These are well-defined and extensive, following the OECD’s three-tiered approach. This requires the preparation of a local and master file, as well as country-by-country reporting along with the general Transfer Pricing documentation.


To combat perceived Transfer Pricing abuses and loss of tax revenue in Cambodia’s state budget, the Cambodian Ministry of Economy and Finance issued the Prakas 986 in  2017.

The Prakas 986 is based on the OECD’s Transfer Pricing Guidelines and requires the steps and results of the benchmarking process to be documented in an OECD-compliant TP document, preferably conforming to the guidance of the OECD’s BEPS Action 13 report of Country-by-Country reporting.


The Ministry of Finance in Indonesia unveiled regulation PMK 213 in December 2016, demanding a tighter deadline for compliance, and follows the guidance of the OECD’s BEPS Action 13.

Transfer Pricing documentation used to only be a requirement for a taxpayer’s operations in Indonesia. PMK-213 changed this. Now, taxpayers are required to follow the three-tiered structure, meaning a Master File, Local File and Country-by-Country Report will all be necessary. 


Singapore is an attractive option for businesses in Asia. To ensure this business is above board, the Ministry of Finance announced it will join the framework for the global implementation of the BEPS. This includes the requirement of Master File and Local File, as well as Country-by-Country reporting.

While taxpayers in Singapore aren’t required to submit Transfer Pricing documentation when filing tax returns, you’ll still need to provide everything within 30 days of receiving a request from the IRAS, so it’s best to keep everything on file.


Thailand may have a reputation for being a bit slow off the mark when it comes to enforcing Transfer Pricing rules, but tighter regulation has finally arrived. There’s now a distinct need to get your Transfer Pricing documentation in order. 

For the most part, Thailand’s Transfer Pricing regulations follow the OECD’s guidelines, with some distinct local details. 

For example, Thailand’s new Transfer Pricing laws allow for 60 days to produce Transfer Pricing documentation once requested. If 60 days is too tight, you can request a further 60-day extension, and if it’s the first time the revenue department has requested Transfer Pricing documents from your company, a third 60 day extension is also possible. That gives first-timers a charitable 180 days to get their paperwork in order.  

That said, Thailand’s tax authorities require local benchmarking for establishing whether your Transfer Pricing rates uphold the Arm’s Length Principle. That means you’ll need to keep a close eye on local market rates. 

Additionally, the Thai tax authority’s statute of limitations extends for a full 5 years, requiring businesses to maintain extensive long term transaction records to avoid penalties and fees.    

Read moreThe impact of COVID-19 on your Transfer Pricing arrangements


Get in touch

Whatever your question our team will point you in the right direction

Start the conversation

Planning Transfer Pricing Policies – Topic Cluster


Why wait until the Thai Revenue Department is knocking on your door to call for help? The more exposed your company is, the greater the risk of being hit by a tax bill and possibly even fines for noncompliance, so what can you do in advance to prevent this?

The answer, simply put, is planning, preparation and policy implementation. 

Before you enter into a controlled transaction or any transaction within your company’s parent group, assess the situation and plan your steps carefully. It’s worth taking some time to analyse what challenges you’re likely to face, how you’ll be able to overcome them and as a result be able to determine when it’s time to call the experts.

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

Let’s face it, plenty of global companies face a range of issues when it comes to getting comprehensive and consistent policies in place – transfer pricing demands a level of transparency that requires copious amounts of data from a range of sources. Typically, in large multinationals, these sources are somewhat disparate and disconnected; all too often companies operating in multiple jurisdictions fail to synchronise their Electronic Resource Planning (ERP) systems, which in turn fragments data throughout the group of companies and often making it difficult to synthesise. 

Now, remember, the clock is ticking from the moment the Thai Revenue Department’s request for your transfer pricing documentation arrives and gathering, validating and harmonising all the data necessary is a lengthy process – one that can prove both time and resource-intensive, particularly if there are any surprises to be found, there is less time to mount a strategic defence. 

You may not be able to tweak systemic issues your company faces, there is no quick fix for issues like decentralised ERP systems, but at least being aware of such obstacles, you can begin compiling the necessary information from all the relevant parties before entering into an intra-company transaction. This is just one aspect where planning can save you time, money and needless stress in an already complex process.

Another means through which you can be proactive to strengthen your case – or at least your ability to respond to a transfer pricing request from the authorities – is tracking. Take into account just how smooth and streamlined your information flows are throughout the company group; budgets, forecasts and targets are difficult to track if this data is not managed effectively and proactively.

This could result in significant adjustments needed at the end of each tax year, which has the potential to convolute your transfer pricing procedures – another good reason to ensure that you have access to all of the information you need before entering into any transaction that may fall under Thailand’s transfer pricing legislation. 

To ensure your monitoring, reporting, forecasting and planning are up to date, be sure to enact company-wide policies that include monthly, quarterly and annual management of all data relevant to intra-company transactions. For this to work, it requires an adequate level of uniformity throughout the group – various software packages can bolster capacity in this area.

Any multinational dealing with big data for tax purposes both including and beyond transfer pricing will recognise the value of flexible reporting that keeps pace with the dynamism of a group that operates across multiple jurisdictions. 

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

There are technological means through which the entire group can collate their transaction data, apply cost allocation rules and adjust data throughout the year – while plenty of options exist, look for packages that guarantee transparent, traceable data that is completely visible. This may feel like an investment, but given the potential of fines for noncompliance with Thailand’s transfer pricing rules, few costs will exceed the amount needed to satiate the Thai Revenue Department. 

Always keep the golden rule in mind; assess before you initiate. Even if all systemic issues have been addressed and your group enjoys a free flow of validated information that is updated regularly, there’s no need to subject yourself to needless exposure by entering into a controlled transaction without doing a dry-run. 

This is where a planning report comes in. While this may feel somewhat like paying for the same thing twice, there are inherent benefits to compiling a planning report and few people will do it better than the professionals. View it as an investment that will pale in comparison to the additional taxes and penalties you could be hit with if the Thai Revenue Department even suspects you might be attempting to shift your profits to low tax jurisdiction.  

A planning report is effectively just a case of putting together the transfer pricing documentation you would need to, but doing it before the transaction takes place. This may take time and slow your transaction down, but – and this cannot be stressed enough – the cost of non-compliance is far worse than paying people who can all but guarantee your company’s dealings are above board.

Much in the way that practice makes perfect, a planning report gives you a chance to see where you might encounter difficulties and allows you to identify these issues without the time constraints and pressure of the Thai Revenue Department, so again – it all comes down to preparation.

Preparing for the worst is a good way to avoid it, but dedicating in-house resources to this process before even entering into a transaction may – for companies of a certain size – be counter-intuitive and that’s why HLB is here to absorb those time-consuming activities and do the legwork for you. 

With a range of tailored plans that are made to fit the specific needs of your business, as well as a host of expertise across a range of industries, HLB offers your company the best chance at making it through transfer pricing unscathed.

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Villa resales for foreigners in Thailand’s resort areas

HLB Thailand Tax Team


Offering properties for “sale” to foreigners under a long term registered lease is becoming the norm for new developments in resort areas. Even condo developments limited to offering 51% of their freehold capacity to foreigners may offer the remaining units to foreigners on a long term leasehold.

If however you are considering purchasing a resale villa from another foreigner, you may very well find that it was purchased as a freehold property. As it is not possible for the foreigner to own the land, it would have been acquired in a Thai company in which he has a minority shareholding and Thai shareholders own at least 51% of the share capital and make up the majority of shareholders in number.

Sale structuring

In the current uncertain climate surrounding the interpretation and enforcement of Thailand’s land ownership and foreign investment laws, resales of these types of properties will most likely be structured as a sale of the owner’s Thai company. This way, transferring ownership of the company avoids the scrutiny of the authorities that a freehold sale of the property would otherwise attract which could prevent the sale going through.

The current owner will therefore end up selling his interests in the Thai company i.e. the company’s shares and any debt financing, rather than the property itself. In the past, a buyer may have preferred to start with a fresh Thai company rather than buy into an existing company and its history but these days this is less of an option for many foreign buyers.

Tax considerations

It can end up being very tax effective for a foreign owner to sell his company on to the next foreign owner. A sale of real estate attract a number of transfer taxes when a transfer is registered at the Land Department office and the gain made from the sale will be subject to corporate income tax of up to 30% and the payment of any gains out of the company in the form of a dividend will attract another 10% tax. It quickly becomes apparent to a seller that the sale of the corporate structure is the best exit strategy, as well as being probably the only viable route in most cases for foreign buyers.

One issue the new owner will face is that the Thai company will continue to record the value of the property in its books at the property’s original cost price and not the value that the new owner has paid. As a result, when the new owner comes to sell the property in the future he too will likely prefer selling the company on as well, otherwise a sale of the property out of the company will mean he ends up making a taxable gain that is equal to the real gain made by him plus the gain made by the owner before him.

The tax on the unrealised capital gain inherited from the seller may not necessarily be a problem in the future, if the current legal environment concerning foreign ownership persists and the sale of the company remains the most practical option. It is an important issue to be aware of however when taking over a company, especially if the property has been held for some time and it has appreciated considerably since it was first purchased. It is of course possible to record a revaluation of the property in the accounting records to reflect the current price paid for the property but this has no affect on the cost base for tax purposes.

Price considerations

The taxes saved by the seller needs to be appreciated early on by the buyer in the sales negotiations. Knowledge of this should give the buyer the ability to negotiate a price that takes into account the Thai tax savings that the seller will achieve from the sale, potentially at the expense of the buyer because of the unrealised taxable gain in the company that he inherits, so that both parties effectively end up sharing in the tax benefits of the share sale.

Taking over the Thai company owning the property will require the usual legal, financial and tax due diligence to understand what exactly the new owner is buying into and whether or not there are any potential liabilities or material issues that might pass over to the new owner. On the tax side for example, if the property has been used as a holiday home by the current owner, he should have been paying some rent to the company – there may otherwise be under declared income for tax purposes. Also the payment of house and land tax of 12.5% on the rental value of the property – payable regardless of whether rents have in fact been paid – should also be reviewed.

Leasehold option

A new owner may consider registering a lease over the property for the maximum term of 30 years to secure his rights to possess the property in the long term. This does not mean he ends up paying for the property twice – the rental can be payable on an annual basis over the lease term and will in many ways be akin to paying rent to himself.

Holding a leasehold interest in the property can then put the new owner in a position similar to many of the leasehold developments on offer – bearing in mind that many of the new developments offered as leasehold may also face the same freehold land ownership issues in the end.

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Thai rental properties and personal income tax

HLB Thailand Tax Team


Foreign investors looking to purchase rental properties in Thailand will often have the choice of purchasing the property in their own name or in an offshore company. The preferred ownership structure will require a careful analysis of the respective costs and benefits, taking into account the particular circumstances of the owner.

From a tax perspective, this will require consideration of the tax laws in Thailand as well as the tax laws in the owner’s home jurisdiction and an analysis of the impact on the investment returns after tax if an offshore company is interposed between the owner and the property.

An important tax issue to consider is the taxes payable on rental income.

Taxes on rental income

Foreign individuals are subject to Thai personal income tax on rental income generated from real estate situated in Thailand. 

In most cases, 15% withholding tax applies to rental income paid to foreign individuals that are not tax residents of Thailand. 

How to pay less than 15% tax

The tax withheld is not a final tax.

A foreign property owner residing outside Thailand could actually end up paying much less than 15% tax in Thailand if he has purchased the property in his own name.

For a foreigner to pay less than 15% tax on rental income, the first step will be to file personal income tax returns with the Thai Revenue Department to declare the rental income. The withholding tax deducted from rents can then be used as a tax credit to offset the tax payable on the return. The reward for filing a tax return is that the taxpayer can then request a refund of surplus withholding tax credits from the Thai Revenue Department.

Preparing and filing a personal income tax return in Thailand is not a difficult exercise.

A property owner is allowed a standard deduction of 30% against rental income, no questions asked. A personal taxpayer does have the option of claiming the actual expenses incurred in deriving the rental income which are necessary and reasonable, but the expenses claimed must be supported by documentary evidence, which may very well need to be furnished for audit before the tax refund is approved.

The refund is not automatic. You will need to specifically request a refund on the return otherwise the Revenue Department will not consider refunding the excess tax paid. if you don’t make the request on the return, it is still possible to make a request within 3 years of the return filing deadline.

Tax rates

A personal taxpayer can earn net income up to Baht 150,000 (approx. USD 5,000) in a tax year and not pay income tax in Thailand. Unlike some countries that seek to tax foreigners at higher rates or deny them the tax free threshold, the tax scales for residents and non-residents are the same in Thailand.

Individuals are liable to personal income tax in Thailand on their net income, after deduction of expenses and allowances, at the following rates:

As the rates of tax are greater than 15% for net income over Baht 750,000 (approx. USD 25,000), there will come a point where the tax payable will be greater than the withholding tax credits.

By my reckoning, the property would need to be generating around USD 140,000 per annum in gross rentals before it came to the point where the withholding tax credits would not be enough to cover the income tax payable when the personal income tax return is filed.

The benefit of filing a tax return is best illustrated by an example. Let’s take the case where a property generates gross rental income of Baht 1,000,000.00 (approx. USD 33,000) for the tax year. The following tax calculation for a typical property owner illustrates the potential tax refundable in this case.

The tax payable in this case is just under 5% of the gross rental income, resulting in more than two-thirds of the withholding tax deducted from rents during the year being refundable.

 The figures speak for themselves and clearly demonstrate one distinct tax advantage for foreigners owning Thai rental properties in their own name.



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Real estate taxation – common area charges



Residential developments in resort areas come in various forms, but they mostly have one thing in common – common areas.

The framework governing the management and use of common areas will depend in some part on how the development is structured under the law. For example, Thailand’s Condominium Act contains provisions governing the framework for the use and management of common areas of condominiums. Housing estates developed in accordance with the Land Allocation Act will also have a statutory framework to follow.

Residential developments in Thailand’s resort areas that are marketed to foreign buyers may not be structured in accordance with such laws, due mainly to the restrictions on foreign ownership of land and condominium units. Under the law, a condominium is a building that is registered under the Condominium Act, which then allows the building to be divided up into units and owned by separate persons. In resort areas, a building that looks and feels like a condominium could in fact just be an apartment building with one owner, with foreign tenants taking possession under long-term leases. Common area services and charges may then be established by contract instead, often mirroring the statutory framework to some extent.

Where the management and use of common areas is governed by contract rather than statute, a number of tax issues will come into play, which may translate into higher common area charges for owners.

Income tax considerations

Owners paying common area charges under a contract will typically pay their common area charges to a corporate entity that is liable to corporate income tax on its profit, which can be as high as 30 percent. Such charges will be considered assessable income of the company for income tax purposes.

Twice a year the company will have to file a corporate tax return and pay tax in respect of its taxable profit. Although the common area charges are being collected to meet on-going expenditures, the way that revenues and expenses are recognised for tax purposes could result in the company recording a profit upon which it has to pay tax. 

This is particularly evident when sinking fund charges are collected at the start for meeting large repairs or capital expenditures in the future. Sinking fund charges will typically be recorded as revenues for tax purposes when they become due from owners.  At the same time, as these funds are being collected to meet future expenditures, there will likely be little or no direct expenses to offset the revenues in the year that they are subject to income tax.

In addition, some outgoings might not be allowed as an expense in the year of purchase but instead may be considered capital in nature and so will have to be capitalised and depreciated over their effective life.

In the case of a condominium however, the juristic person formed under the Condominium Act tasked with the responsibility of managing the condominium and receiving common area charges, is not an entity subject to income tax under the Revenue Code. Funds can therefore be collected from owners without having to consider any income tax implications.

VAT considerations

Another issue faced by providing common area services under contract is 7 percent VAT. Although the rental of immovable property is specifically exempt from VAT, service charges relating to the use of common areas will be subject to VAT. This means that 7 percent VAT must be added to the common area fees charged to owners.

The chance of making errors – and hence liability to tax penalties – normally increases once you enter the VAT system and are running VAT and non VAT businesses.

Small developments might be able to avail themselves of the small business exemption. Where the annual turnover from services chargeable to VAT does not exceed Bt1.8 million, the business does not have to register for VAT. This means the business could legally stay out of the VAT system and not add 7 percent VAT to any of the amounts charged to owners.
As you might have guessed, the treatment for a condominium is the exact opposite. The courts and a Board of Taxation Ruling have confirmed that the funds collected from owners to meet the costs of common area expenses and public utilities are not subject to VAT.

Where the use of common areas is provided under a service contract, such agreement may be a hire of work agreement as defined under Thailand’s Civil and Commercial Code and subject to stamp duty under the Revenue Code.

It is evident that by establishing the framework for the management and use of common areas through contract, a number of tax issues will also have to be managed. Understanding and planning for these tax issues can reduce additional costs that owners might face as a result.

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Capital gains and the Thai tax system

HLB Thailand Tax Team

Foreign property owners interested in maximising the financial returns from their foray into the Thai property market should take a moment or two to understand the impact taxes will have on their financial returns.

A savvy investor will often seek tax advice about tax planning that can be done – in compliance with the prevailing laws – to mitigate the taxes payable.

An important aspect of tax planning for property investment is the mitigation of tax liabilities arising upon disposal of the property. Tax planning to maximize the capital gain on exit normally requires planning at the start.

Depending on where you get your tax advice, you may think that Thailand does not have capital gains taxes. While that may be true, there are certainly taxes on capital gains, which may be as high as 35%! The point being that capital gains are taxed just like other forms of income from investment or trading.

Taxes on capital gains

Your liability to Thai income tax when you sell real estate in Thailand and the level of tax payable will depend on a number of factors, including:

  • Whether you have bought the property in your own name, through a Thai company or in the name of a foreign company – personal tax and corporate tax rules differ significantly.
  • The legal form in which the property is held, which can vary due mainly to the restrictions on foreign ownership of land e.g. an apartment held on a long term lease, freehold land and villa owned via a Thai company or a lease over land combined with freehold ownership of the villa on the land, to name a few of the legal forms used.
  • How you structure the deal on exit – there can be different aspects to the sale that may need the sales price to be apportioned, which can affect the liability to tax. Sometimes the deal ends up being structured as the sale of the corporate vehicle holding the real estate rather than the property itself.
  • Whether the sale needs to be registered with the authorities in Thailand, and if so, whether there will be some form of withholding tax imposed.
  • Whether or not a double tax agreement exists between Thailand and the seller’s country of residence – this might be overlooked because double tax agreements often don’t help when it comes to real estate. However if the deal involves a leasehold or sale of a corporate vehicle, then a double tax agreement may have a substantial impact.

So you can see that there are a number of factors that can affect whether or not you pay tax in Thailand on a capital gain and the level of tax payable.

Apartment lease

The best way to illustrate how the Thai tax system works is to run through an example. Let’s consider the case where you take a long term lease over an apartment, which is a common structure used in resort areas catering exclusively to foreign buyers.

If you make the lease in your own name, Thailand’s Revenue Code provides that an individual deriving assessable income from property situated in Thailand is liable to personal income tax, regardless of whether such income is paid within or outside Thailand and whether you are a tax resident of Thailand or not.

The Revenue Code does not prescribe under what circumstances property will be considered “situated in Thailand”. It is a pretty safe bet though that the lease, which is a form of property distinct from the real estate under lease, would be considered property situated in Thailand for tax purposes.

Personal tax on transfer of a lease

The gain on transfer of the lease would be subject to personal income tax at the marginal tax rates ranging from 5% to 35%. There won’t be any tax withheld when the lease transfer is registered, so it will be up to the seller to file a personal income tax return. Obviously the tax authorities may face difficulties collecting tax from a foreign seller if a return is not filed – there are provisions however that impose a duty on the agent appointed to manage the property to file tax returns on behalf of the property owner which could be enforced.

Double tax agreements

Thailand has a comprehensive collection of double tax agreements, with over 60 countries currently signed up to prevent double taxation of their residents.

These agreements normally prevent double taxation by either allowing one country only to tax the income or granting taxing rights to both, in which case the foreign taxpayer will only pay tax in his home country if the tax paid in Thailand is insufficient to offset his tax liability at home.

So how would the transfer of an apartment lease be taxed under a double tax agreement? Much depends on the terms of the particular agreement, because although the agreements generally follow a similar form on the whole, the taxation of capital gains is one area where the terms do vary from country to country. It will be important to properly characterize the lease to determine which provisions of the double tax agreement apply to the gain.

Where a double tax agreement does provide protection from Thai tax on capital gains made from the transfer of a lease, greater attention will be given to mitigating the taxes payable in the taxpayer’s country of residence. Of course, this will not be an issue for those living in countries with no capital gains taxes!



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How is the Covid-19 pandemic impacting Thailand’s medical hub ambitions?

Oxford Business Group

As Thailand begins to gradually ease coronavirus-related restrictions, the government is looking to cement the country’s position as an advanced medical hub in Asia.

From May 3, small retailers, street food vendors, restaurants outside malls, parks and outdoor sports venues have been permitted to reopen as policymakers look to kick-start economic activity that has been curtailed by lockdown measures.

Alcohol sales have resumed for home consumption, while restaurants that have reopened may only serve soft drinks and must ensure that customers are seated at least 1.5 metres apart.

Although some restrictions have been lifted, Thailand has also extended its state of emergency until May 30. International flights remain suspended and bars, cinemas, department stores and indoor sports facilities are among the popular entertainment attractions that are still closed.

The decision to begin easing the lockdown was prompted by several consecutive days in which new confirmed infections were in the single digits.

As of May 5, Thailand’s cumulative Covid-19 count stood at 2988 cases and 54 deaths.

Upon relaxing measures on May 3, the government said it would closely monitor the situation for two weeks before deciding whether to ease more restrictions or re-impose strict lockdown measures.


Medical hub ambitions

Thailand’s response to the coronavirus pandemic has been aided by a robust health care system.

Indeed, Thailand was ranked sixth out of 195 countries in the 2019 Global Health Security Index, calculated by researchers at the Nuclear Threat Initiative and John Hopkins Centre for Health Security.

This meant Thailand was the highest ranked emerging economy and Asian country in the index, which is specifically devised to measure a country’s preparedness for a pandemic.

Prior to the outbreak of Covid-19, Thailand was already working to establish itself as the medical hub of Asia.

Guided by Ministry of Public Health’s 2016-25 strategic plan entitled ‘Thailand: A Hub of Wellness and Medical Services’, stakeholders have been working to develop an advanced medical industry ecosystem underpinned by innovation and research and development (R&D).

The strategic plan also aligns with the government’s overarching ‘Thailand 4.0’ strategy, designed to help the country escape the so-called ‘middle-income trap’ through the cultivation of innovative, high-value manufacturing and service industries. 

Already popular as an international health care tourism destination, the push to further develop the country’s medical ecosystem was partly driven by Thailand’s ageing population, which is expected to result in increasing domestic demand for quality health care services.

Thailand ranks second in ASEAN behind Singapore in terms of the percentage of the population aged over 60, and this proportion is expected to increase significantly over the next 50 years.


New incentives

As the global pandemic has added further strains to frontline health services and back-end supply chains, Thailand’s Board of Investment (BOI) announced additional measures in April to accelerate investments in the medical industry, which could have positive implications for the sector’s broader strategic goals.

Complementing the pre-existing tax holiday of between three and eight years for qualified companies operating in the medical device, equipment and supply industry, the new measures include a 50% reduction in corporate income tax for a further three years. This additional incentive is available to firms who apply before June 30 and begin production before December 31.

Furthermore, manufacturers that adjust existing production lines to manufacture medical devices or parts will be exempted from import duties on machinery in 2020, provided they apply before September.

Additional tax benefits are being offered to companies producing non-woven fabric used to manufacture medical masks or medical devices.

“These measures are aimed at a fast response to this specific situation, but were designed to also pave the way for longer-term development,” Duangjai Asawachintachit, secretary general of Thailand’s BOI, told OBG.

“We believe that our proven capability to manage the pandemic, as well as enhanced local technological capabilities and strong existing supply chains, will further accelerate investments in medical innovations and biosciences, both in the short and long term,” she said, adding that the number of initial inquiries that the BOI had received in response to the new incentives made her optimistic about investment in the sector in 2020.


Neighbourhood demand

Although Thailand is already well positioned as a centre for medical innovation, it may face more competition as governments re-evaluate their dependency on overseas shipments of essential items.

“Taking into account the disruption in global supply chains, lots of countries within the region will look to become more self-sufficient in producing medical devices and pharmaceuticals that can strengthen their resilience against infectious disease outbreaks,” Paul Ashburn, co-managing partner of business consultancy firm HLB Thailand, told OBG.

“However, Thailand had already made a head start, so it is well placed to capitalise on increased regional demand over the next 12 months,” he added.

Ashburn pointed out that Thailand’s immediate neighbours in the greater Mekong region – Cambodia, Laos, Myanmar and Vietnam – all have lower GDPs per capita and less advanced health care systems.

As such, affluent patients from neighbouring countries are likely to still seek medical treatment in Thailand’s superior medical facilities once border restrictions are eased, even if it may take longer for medical tourists from other core markets in the Middle East, US, Europe and the Indian subcontinent to return en masse.

In addition, as many of Thailand’s neighbours will not be able to immediately count on domestic production to stockpile personal protective equipment and necessary medical supplies in the wake of the pandemic, Thailand will be an obvious source market due to its production capacity and close proximity.

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