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



We understand that getting your affairs in order for tax purposes is a procrastination-inducing task. 

Despite this, there is no excuse for avoiding Transfer Pricing – not when the revenue department are knocking at the door. 

Our guide will help you demystify the cloud of confusion surrounding Transfer Pricing. Here, we’ll cover everything you need to know about Transfer Pricing in Thailand. We have it all, including the new changes coming, and how you and your business can prepare. 

Remember, it’s easier to be compliant than it is to be audited.


Chapter 1: What is Transfer Pricing?

A Brief history of Transfer Pricing 

Transfer Pricing terminology, simplified 

International case studies 

Chapter 2: Transfer Pricing in Thailand 

What’s changing in Thailand? 

Thailand’s adoption of OECD rules on Transfer Pricing 

What about Southeast Asia? 

Which companies will be affected? 

Chapter 3: How will I be affected by Transfer Pricing? 

What transactions will be subject to Transfer Pricing laws? 

What’s included in Transfer Pricing documentation? 

Chapter 4: What if I get Transfer Pricing wrong? 

This is why you need professionals 

Chapter 5: How do I become compliant in Transfer Pricing 

Planning Transfer Pricing policies 

Chapter 6: Choosing a Transfer Pricing consultancy firm 


Chapter 1: What is Transfer Pricing?

Contrary to popular belief, Transfer Pricing is not as complex as it may seem. It’s actually fairly simple once you get your head around a few basic concepts. So, before descending into a fit of “TP” panic, take a breath and read on.

Transfer Pricing is the price agreed upon for the transfer of goods or services within a group of companies. Any deal between companies with the same owner or parent company – or in any way under the same control – will be subject to Transfer Pricing. 

Tax authorities around the world implemented the Transfer Pricing guidelines created by the OECD, and then localised them to suit their requirements. 

By implementing Transfer Pricing laws, tax authorities around the world are trying to make sure that companies are not paying more to third parties, or vis-a-versa, or that they’re not undercharging while dealing with companies in their group. This way, they make sure they get a fair share of taxes in their respective jurisdiction.

Say your company owns a manufacturing business and a distribution business. If you want to sell your manufactured goods to your distribution business, then transfer pricing is just the price you’ll charge your own company. 

There might be a burning temptation to sell those manufactured goods to your distribution business at special rates. You’ll have to resist this temptation, however, if you want to stay on the right side of the new laws in Thailand. 

Charging a price that is either deliberately lower than the market price or deliberately inflated to shift profits will face some hefty fines. 


A brief history of Transfer Pricing 

Over 60 countries worldwide have Transfer Pricing laws in place. 

Some even date as far back as the 1930s. The most widely-utilised white paper on transfer pricing documentation set of rules are based on the Organisation for Economic Cooperation and Development (OECD). 

The OECD’s rules didn’t exist until 1948, when it was summoned into existence to rebuild the global economy following World War 2. 

As the OECD developed, it evolved and grew in power and relevance. So too did the rules of economic cooperation. 

With 36 of the most mature economies as member states, the OECD has played an instrumental role in developing policy as needed for an increasingly globalised world- no longer can nations expect to exist in a vacuum. Economies around the world are becoming more interdependent. 

With such a tangled web of connections developing, more sophisticated policies were needed to govern growing economies. Since the OECD’s inception, the USA’s wealth has almost tripled, the world’s population has shot up from just over 2.5 billion to almost 8 billion today, and digitalisation is transforming everything, from the way we do business to the way we search for love. 

It was around 1988 that the OECD wrote a white paper on Transfer Pricing. It wouldn’t be until 1994 when it was adopted as policy for the OECD, and since then it has mutated to meet the demands of an ever-shifting global business landscape. 


 So the OECD’s guidelines are basically the global bible of Transfer Pricing. 

This doesn’t mean they’re ironclad rules for the world. Plenty of countries have adopted and adapted, tweaking and tuning the OECD’s guidelines on transfer pricing to meet the national context. 

Transfer Pricing is designed to try and promote a level playing field, and prevent the bigger businesses from being able to exploit their size to gain an unfair advantage. 

What’s more, Transfer pricing is a means of calculating profits that will then be taxed. That tax is then collected directly from the business – unlike indirect taxes such as VAT, GST, Fringe benefits, and more. So while there is no specific Transfer Pricing tax, it’s all a part of the taxation process. 

It doesn’t matter who you are, what your company’s functions are, or what the nature of your relationship is with other companies under the same control or ownership. Any deals made between your company and any other in that same group will be subject to Transfer Pricing. 

In some parts of the world, there are even broader definitions of Transfer Pricing. Some nations will apply Transfer Pricing rules to deals with third party companies. This is provided the relationship between the parties involved in the transaction is considered ‘close enough’. 

What ‘close enough’ means exactly will vary from country to country. So, always check which jurisdiction you’ll be working within. 

It’s also worth remembering that Transfer Pricing guidelines will apply locally and internationally. This means different laws will apply to different transactions, depending on the location of the parties concerned. 


Transfer Pricing Terminology, simplified

Arm’s Length Principle: 

This has nothing to do with measuring distance, but how prices are charged in related companies. If you charge above or below the going market rate for goods or services, you’ll be violating the arm’s length principle.

The arm’s length principle clearly states that transactions between related companies or entities must be as close as possible to resemble the same transactions between independent companies or entities. 

This is the central tenet of transfer pricing and not to be under, overvalued.

Benchmarking Study: 

If you want to be compliant with Transfer Pricing rules, you’ll need to conduct a local Benchmarking Study, specific to Thailand. Getting the right prices from comparable companies will allow you to work out what price to charge a related company when involved in a transaction that comes under Transfer Pricing. 

You need to show that you’ve calculated your agreed price based on the market rates. You also need to show that you’re charging a related company the same price you would be charging any other company for your goods or services. 


Base Erosion and Profit Shifting (BEPS) is the legal framework used by the OECD and adopted widely around the world. It ensures companies aren’t shifting profits to lower-taxation jurisdictions, or tax havens, through inappropriate Transfer Pricing arrangements. 

Functional Analysis: 

Essentially, a blueprint for the related companies, presented as an overview of the roles and relationships of all related companies or entities and how they share assets, assume risks and generally interact with one another. 

Functions, Assets and Risk analysis (FAR) is the heart and soul of the Transfer Pricing Documents. Specifically, FAR:

  • Specifies the functions undertaken by parties to the transaction.
  • It establishes the different department’s functions in order to support the business for inter-company transactions.
  • It defines the role of the other party in the transactions.
  • Defines the assets the company utilised to function its business operations.
  • It shows the nature and types of risks undertaken by the respective parties to the transactions.
  • It outlines the risks related to the transactions and who undertake such risk.
  • All of these points lay down the foundation of “characterisation” of the company.

Comparability Analysis: 

How you choose which method to use when calculating the going market rates for goods or services. It’s crucial that you’re able to show how you arrived at your price when the taxman comes to check all is in line with Transfer Pricing guidelines. 

Comparable Uncontrolled Transaction: 

There are two situations under CUP; internal and external.

Say there are three parties. One is in Thailand (company A), one is in Vietnam (company B), and one is in Cambodia (company C). A and B are related parties, and C is an independent party. A is buying from B, and B is selling to C. 

Internal CUP would mean that party B is charging a similar price to parties A and C, providing the products are same and the terms and conditions are also same, with very few adjustments involved.

External CUP simply means the transactions between independent parties with similar product and few adjustments. 

Controlled Transaction: 

A transaction of goods or services between two related parties. This could be between the Thai and Vietnamese divisions of the same company or between a parent company and one of its subsidiaries. When dealing with each other, these related companies will need to apply the arm’s length principle. 


In simple terms, an ‘intangible’ is something that belongs to a company but is not a physical or financial asset – e.g. intellectual property or organizational know-how. There are two types of intangibles:

  1. Marketing intangible: used in business operations that is customer-facing i.e. trademarks, trade names, customer lists, customer relationships, unique names, etc.;
  2. Trade intangible: includes patents, know-how, designs and models used for the production of goods or the provision of services, etc. 

Whenever a company’s intangible assets are used for commercial purposes by another party, a royalty rate has to be paid – a fixed value or a percentage (depending on the license agreement) of the revenue gained through their use. 

Interquartile Range: 

Also known as IQR, it provides a range by ignoring the lower 25% and the highest 25%, which can be considered as outliers. IQR is a measure of where the “middle fifty” is in a data set. Where a range is a measure of where the beginning and end are in a set, an IQR is a measure of where the bulk of the values lie.

Multinational Enterprise: 

Often abbreviated down to MNE, it’s a way to refer to a group of related companies that collectively operates in two or more countries. Think Facebook, Google or Amazon who all have offices around the world, not to mention a heap of subsidiaries – we’ll deal with them later. 

Transfer Pricing Methodologies:

There are five OECD prescribed methods, in addition Thai RD introduced an additional method (other method) you can use to calculate the transfer price in accordance with the Arm’s Length Principle:

1. Traditional Transaction Methods: The Comparable Uncontrolled Price (CUP) method, Resale Price Method (RPM) and the Cost Plus Method (CPM) are considered traditional methods for establishing the Arm’s Length Principle in transfer pricing.

  • Comparable Uncontrolled Price (CUP) Method:

This method compares the price of goods or services in a controlled transaction against the price of similar goods or services in a similar uncontrolled transaction. The key here is comparability in terms of circumstances and factors.

  • Cost Plus Method:

This method uses the costs incurred by the supplier of the goods or services in a controlled transaction. You’d need to add a cost plus mark-up to this cost in order to determine an appropriate profit in light of the functions performed. 

You’ll need to be sure you’ve taken assets and risks into account too, as well as the current market conditions. Essentially once you’ve added the cost plus mark-up, you should have a transfer price in line with the Arm’s Length Principle. 

  • Resale Price Method:

This method looks at how much a product could be resold to an independent company after having been purchased from a related company in a controlled transaction. The resale margin reduces the resale price and once you subtract the resale price margin is – for the most part – considered an Arm’s Length price, although certain adjustments must be considered depending on the resale to an independent company.

The RPM evaluates whether the amount charged in a controlled transaction is at arm’s length. This is based on the gross margin realised in comparable uncontrolled transactions. This method is generally used for distributors that resell products without physically altering them or adding substantial value to them

2. Transactional Profit Method: Profit Split Method (PSM) and Transactional Net Margin Method (TNMM) are considered traditional profit methods for establishing the Arm’s Length Principle in transfer pricing.

3. Profit Split Method: This method looks at profits and how they ought to be split in a controlled transaction. Splitting the profits in an economically valid way that gives an approximate division of profits that would have been found following a transaction that meets Arm’s Length standards. 

The PSM determines arm’s length profit based on combined profits derived by the counterparties to the transaction. PSM is mostly used in cases where the parties to a transaction make highly-integrated or complex contributions to the transaction, often involving the creation of an intangible asset.

4. Transactional Net Margin Method: The TNMM examines the net profit that a company derives from a controlled transaction relative to an appropriate base (e.g., costs, sales, or assets). Typically, TNMM is used as financial data on comparable independent companies is commonly publicly available. Moreover, TNMM is also more tolerant of accounting inconsistencies as its use of net operating profit analysis, which naturally captures both cost of goods sold and operating expenses, allows for a more consistent comparison of financial results albeit differing accounting treatments as to cost classification. 

5. Uncontrolled Transaction:

This is exactly what you might think it is after having read about controlled transactions. It’s a transaction between two independent companies who aren’t related and are therefore not subject to Transfer Pricing. 


International case studies 

There are more than a few of these available and each one underscores the importance of getting your transfer pricing in order. While these scenarios may not apply to you directly, it’s important to be aware. 

One famous case – so infamous in fact, that it has become synonymous with corporate tax evasion – is the Double Irish with a Dutch Sandwich. 

Beyond the bizarre title, a Double Irish with a Dutch Sandwich is essentially a ploy to use Irish and Dutch subsidiaries to shift profits from higher-tax jurisdictions and into low or no-tax jurisdictions. 

Ireland is notoriously generous to corporations. They even attempted to prevent an EU court case that would have had Apple pay Ireland backdated taxes that it had successfully avoided. 

In this case, billions of dollars were being siphoned through a network of subsidiaries with the express intent of avoiding taxation in countries where corporation tax was high. 

One of the ways to do this is through profit shifting, which is ensured through Transfer Pricing. 

Google reportedly shifted $22 billion through a Dutch company who, in turn, transferred it to an Irish company based in Bermuda. This left Bermuda to collect $0 in tax from all this wealth due to its national taxation laws. 

This particular case centred around the issue of intellectual property and licensing, which allowed Google to shift profits from the US to Ireland, but has since reported that they will discontinue to do so from 2020.

Similarly, in 2017, the Australian Tax Office won big against Chevron and netted an AUS$340 million tax bill after a court ruled on an intercompany loan between Chevron Australia Holdings and its US-subsidiary Chevron Texaco Funding Corporation. 

The key issue in this was the interest rate with which the $2.5 billion loan was agreed – with the Australian Tax Office arguing that 9 per cent interest exceeded the Arm’s Length Principle and Chevron was forced to cough up. This was another landmark case as it provides a precedent for future intercompany loans conducted through Australia. 

Furthermore, the 2009 landmark ruling from Canada highlights not only the intricacy of arm’s length policies, but also the sublime complexities of Transfer Pricing laws. 

The case centred around General Electric Capital Canada Inc. (GE Canada) who, in 2009, won the right to use its parent company’s name to acquire a cheaper loan for a subsidiary.

The Canadian tax administration argued that the guarantee provided no economic benefit to GE Canada and, therefore, its arm’s length price would have been nil. GE Canada enjoyed a so-called “implicit support” from its Parent. 

The Parent could never allow its like-named affiliate, such as GE Canada, to default on its debt, as it would damage the Parent’s own AAA credit rating and increase its borrowing costs significantly. Due to this “implicit support”, GE Canada would have had the same credit rating, which would allow them to borrow the same amount of money at the same interest rate without the guarantee.

GE Canada argued that the approach of the Canadian tax administration was flawed. They stated that it wouldn’t allow evidence on the price of a comparable arm’s length guarantee arrangement, as required by the transfer pricing rules.

The basis of the Canadian tax administration’s position was simply that the guarantee was not necessary in GE Canada’s business.

GE Canada presented expert evidence that, without the guarantee of its credit, its rating would have been BB as opposed to AAA, and its cost of borrowing would have been higher.

The court held that the factor of “implicit support” is relevant in an arm’s length analysis under the Transfer Pricing rules. It also noted that Transfer Pricing rules can apply if the value of the benefit received from a transaction is nil and, consequently, the transaction cannot be compared with an arm’s length transaction.

In its analysis, the court compared the borrowing cost of guaranteed debt as opposed to the borrowing cost of unguaranteed debt. By relying heavily on expert witnesses, the court determined that:

  1. GE Canada’s stand-alone credit rating without the guarantee and without the “implicit support” from the Parent would have been B+ to BB-.
  2. When the factor of “implicit support” from the Parent is taken into account, GE Canada’s rating without the guarantee would only go up to BBB-/BB+.
  3. The GE Canada’s interest cost savings afforded by the guarantee was approximately 1.83%. 

Based on this evidence, the court concluded that the 1% guarantee fee did not exceed an arm’s length price because GE Canada “received a significant net economic benefit from the transaction.”

This gives the subsidiaries a significant advantage in terms of access to finance. Also, the judge noted that the OECD framework is simply a guideline. 

As such, every case would need to be looked at individually, highlighting the value of professionals when dealing with Transfer Pricing. 

If you have any question about your company’s Transfer Pricing documentation, book a free one-on-one meeting with our specialists now. We are more than eager to help!

Chapter 2: Transfer Pricing in Thailand 



Now that we’ve covered the basics, it’s time to look a little closer to home. 

Thailand is a nation on the move, but the Thai economy has had a rough ride of late. 

Having relied on tourism, and acting as a Southeast Asian logistics hub, the Thai economy has bounced back from the crash of the 90s. The nature of key industries is changing though, and unless Thailand can keep up, it will be left behind

Following the suspension of Thailand’s tariff-free trade with the US under the Generalised System of Preferences, it’s important that revenue streams become more diverse. This is common for middle-income countries around the world. Tax regimes are undergoing a transformation to combat a looming global economic downturn. 

What better place to start than with those who can afford it

Transfer Pricing guidelines typically impacts all taxpayers having intercompany transactions. However, it tends to impact more to large taxpayers, given the nature of who it applies to. 

It’s worth noting that those making over 200 million Baht in revenue will be subject to extra scrutiny and will need to provide a Transfer Pricing Disclosure form, as well as the standard Transfer Pricing documents, but for all those beneath the threshold, getting compliant is still no easy feat. 

Now that Thailand is set to fully adopt the OECD guidelines on Transfer Pricing, however, any companies with intercompany transactions will be affected, and will need to prepare the required documents. 


What’s changing in Thailand? 

Currently, a lot of people think that Thailand’s revenue department is a weak touch. They believe the rules won’t be enforced or that they won’t be caught out for breaking them. Everything changed, however, in January 2019. 

Changes have been in the pipeline since 2017. It has been refined over the course of 2018 and was enacted on November 18th in 2018, where it came into effect from January 1st 2019. There was a draft Ministerial Regulation on TP documentation lodgement submitted for Thai Cabinet’s further consideration in as late as June 18th 2019.

This being said, the first time the new law will be practically enforced will be May 2020 for December year-ending companies. This is due to the period of time given to companies to prepare documentation once the tax department formally requests it. That’s 150 days following the closure of the accounting year.

Ignorance is no excuse, we’re afraid. If anything, telling the tax department you didn’t know about the changes will likely be used against you when it comes to calculating your fines. 


Thailand’s adoption of OECD rules on Transfer Pricing 

The government has seen a drop in tax revenue collection. It’s also been broadsided by a range of factors that have led to an overall growth slowdown not just in Thailand, but globally. 

The World Bank has predicted a sluggish growth for Thailand, with GDP growth of just 2.7 per cent for 2019, creeping up to 2.9 per cent in 2020 and reaching 3 per cent by 2021. 

Compare this with neighbouring Cambodia, whose GDP has grown over 7 per cent for years now. Or with Vietnam, where GDP growth is expected to sit around 6.5 per cent for 2020 and 2021. Thailand’s economy, on the other hand, is invariably slowing down, which usually signifies reforms on the horizon. 

There is a misconception about the new Transfer Pricing rules disclosures to come into play by May 2020. Many seem to believe that, because they only need to provide Transfer Pricing documentation on request from the tax department, they won’t need to have it ready in advance. This is not only wrong, but dangerous

Once the tax department decides to audit you, it’s very, very unlikely that you’ll get away without paying them something. Preparation will help you mitigate some of the harsher penalties.

Anyone caught unprepared will be in trouble.

Here’s how it would play out: if the tax department requests documentation to prove you’re compliant with transfer pricing you have 60 days to present it to them. However, you can extend another 60 days on top of this, making it a total of 120 days from when you received the request, or a further 60 days again if it’s your first time having these documents requested, making it a total of 180 days. 


What about Southeast Asia? 

This is infinitely more relaxed than many Southeast Asian nations. 

The Philippines and Vietnam, for example, gives companies just 15 days, with a possible 15-day extension, making it next to impossible to get Transfer pricing documentation in order. For Indonesia, that’s seven days upon request, or 30 days in case of tax audits.

southeast asia transfer pricing status

While none of Thailand’s regional neighbours are permanent members of the OECD, Singapore, Malaysia, Thailand, Vietnam, and Indonesia have all signed up to the four minimum standards of BEPS – Action Plan 5 on Harmful Tax Practices, Action Plan 6 on the Prevention of Tax Treaty Abuse, Action Plan 13 on Country-By-Country Reporting and Action Plan 14 on Mutual Agreement Procedures. 


Which companies will be affected? 

The short answer is everyone involved in intercompany transactions or does deals with related parties. At least any MNEs and companies with subsidiaries, divisions or parent companies. So, don’t worry if you’re a small to medium enterprise, Transfer Pricing will most likely not be a concern, unless you have intercompany transactions. 

If your company earns more than 200 million Baht in revenue per year, however, you will need to make an additional disclosure. This further complicates the issue. 

Typically, preparing quality Transfer Pricing documentation requires time and effort to capture the correct picture, and cannot be produced overnight. 

This is assuming you’ve already got a good sense of what to do with your economic analysis and your benchmarking for the comparative analysis. 

If you haven’t prepared your Transfer Pricing Documentation, get ready to pay some fines. It’s up to 200,000 Baht just for not presenting the documentation on time. 

Once you’ve failed to produce your documentation, then you are fully open to investigation from the Revenue Department and should the Thai tax department find irregularities or suspect you of having tried to shift profits or evade tax through transfer pricing, the fines are limitless. 

Thailand’s Transfer Pricing laws, it seems, are aimed at companies with annual revenue of more than 200 million Baht. Those companies enjoying the ease with which they can shift profits to Hong Kong, where tax is lower than Thailand’s rate of 20 percent, had better start getting the paperwork ready. 

For december year-ended companies, May 2020 will not only see enforcement taken more seriously, but the tax revenue department will be coming after the biggest fish first. 


Chapter 3: How will I be affected by Transfer Pricing? 


If you’re engaging in deals with related parties subject to Transfer Pricing then listen up. Here’s your handy guide on what to prepare, what will change in 2020 and how you can stay ahead of the curve. 

While by no means exhaustive, this should prepare you for the central changes that are coming, as well as providing a general idea of what will be expected of your business. 


Why should I care about Transfer Pricing? 

Anyone who doesn’t have Transfer Pricing documentation in place is likely to be hit hard. 

The value of preparation in advance cannot be stressed enough. Think before you leap into a new deal with a related company, or start planning a controlled transaction. 

Enforcement will be improving over the coming years

If you don’t have your Transfer Pricing documentation and arrangements prepared then you face the risk of being selected by the revenue department. If they want to choose any particular timeframe within a five-year period, they will be able to. This means they could request your documentation for 2019 any time until May 2025 (for december year-ended companies). 

Similarly, if your company is generating over 200 million Baht in revenues each year, you’ll need to pay particular attention to the Transfer Pricing Disclosure form – not only is it crucial for when the revenue department want to check your compliance with the law, but it will be used later as a risk assessment tool by the revenue department as a means of determining at-risk businesses.

Any missing documentation could have dire consequences for you and your business. It’s time to get into the habit of treating Transfer Pricing documentation and disclosure form (if applicable) as another compulsory element of compliance. 

Be proactive – the time is now. 


Which transactions will be subject to Transfer Pricing laws? 


 Much of this will be determined by the type of business you run and which sector it belongs to. In this case, being safe is not only better than being sorry, it’s cheaper too. 

There are many transactions that could fall under the Transfer Pricing umbrella. It could be fees, sales of goods, the purchase of materials, parts or royalties, as well as more nuanced issues like management/service fees, the purchase of fixed assets and interest on loans offered or guaranteed by related companies to name a few. 

Distributors will need to check the purchase and sale of goods, any royalties involved and the management fees, to name a few. 

Those providing services will have to ensure that the provision or receipt of any services to or from related companies is properly accounted for in their Transfer Pricing documentation. Whether it is professional services, available services or support services. It doesn’t matter which, it’s all covered. 

On the finance side, companies will need to document their intercompany loans, interest payments, guarantee fees, receipts, and cash pooling arrangements. These (and more) will be targeted by the revenue department. Even interest free loans are included.


What’s included in Transfer Pricing documentation? 

Remember – this is all in a bid to create a more level playing field for businesses. So, while it might seem like a hassle to have to prepare all this new documentation, it’s all in the pursuit of a more transparent, modern Thailand

Earning above 200 million Baht 

Documentation is complex for everyone, though even more so for those earning above the 200 million Baht threshold. There is an extra level of documentation, unlocked for those particularly well-off companies. This is known as the Transfer Pricing Disclosure. 

All of your corporate taxes need to be submitted, along with details of all transactions within the group, the value, and the nature of those transactions. You’ll also need any additional information that may have played an impact. 

Questions may delve as deep as whether you restructured during the accounting year, and whether this impacted your profits or revenue, along with the transfer of intangibles, and intangibles transfer, disposed or distributed, and much more. You’ll need to be prepared for anything. 

Fortunately, this will only impact mid to large-sized companies who ought to have the resources to cope with it. Be aware, however, that this will have to be submitted within the same timeframe as the other documents. 

This will also need to be substantiated. So, emails, invoices, agreements, board resolutions and more that pertain to these deals will also be required. Appendices related to your chosen process of benchmarking, and other supporting documentation, may vary. It could depend on the method through which you performed your economic analysis – even this will need to be defensible. Prepare yourself for scrutiny at every level, choosing a method for Transfer Pricing requires justification to the Thai revenue department. 

In short, be thorough. 

Earning below 200 million Baht 

Many companies earning below the 200 million Baht threshold for revenue needn’t worry. They won’t have to submit a Transfer Pricing disclosure form. There will be standard transfer pricing documentation. This will ensure your company is following the arm’s length practice when doing deals with related companies. 

Documentation is essentially a three-tiered deal. You need your Master File, Local File, and Country By Country Report. All of these documents fall under the BEPS Action Plan 13. All companies will have to provide the Local File, irrespective of the size. Who needs to provide the Master File and the Country by Country Report, however, is still yet to be decided. 

You need all three to play the game, but there’s sadly little guidance on both the Master File and the Country By Country Report from the Thai government so far. Keep your eyes peeled for this in the months to come. We’ll be sure to update you. 

Let’s start with what the Master File ought to look like. 

So far the Thai revenue department aims to follow the OECD guidelines on transfer pricing pretty much to the letter. That means there’s a good chance it’ll have a set of international standards for this document. 

The Master File is your overview of the whole group and must be prepared by the ultimate owner of the group or a surrogate appointed by the ultimate parent. You’ll need to show how the group of companies fits together in a way that clearly defines the supply chain; where the value lies and which products or services are being dealt with by which member of the group. 

Similarly, this file will show how the group is financed – both internally and externally – along with where the intellectual property of the group is held, who is responsible for research, development and providing services throughout the group.

Think of this as the family tree for your company, with the ultimate controlling force at the top. Following that will be an explanation of the roles and relationships of all the various components that make up the company as a whole. 

Next up, you’ll need the Local File. Unlike the Master File where a high-level group is discussed, Local File covers intercompany transactions instead. It essentially outlines the way in which all the companies interact with one another and which transactions impact which components of the company. 

Knowing who has transactions with who is going to be key for the revenue department. It will help to determine whether you’re really transacting at the market rate. This needs to be very clear in the document. 

The Thai government will be adopting the Country By Country Report, and has issued draft rules for public consultation.

What we expect to see here will be the standard-issue three tables. 

Firstly, it will need to highlight the number of companies in each country you’re operating in. It will also need to show the revenue generated by each location within the group, as well as their tangible assets. This report will need to be in-depth and exhaustive – it covers the global allocation of a companies key financial information, which includes income, employees, taxes and business activities. 

The second table requires the name and nature of each company operating in each country. This provides a holistic picture of the group’s supply and value chains. 

The third and final table, aims to tackle assumptions made while reporting details under table one and two. 

If you have any question about your company’s Transfer Pricing documentation, book a free one-on-one meeting with our specialists now. We are more than eager to help!

Chapter 4: What if I get Transfer Pricing wrong? 


Put it this way, nothing good happens if you get Transfer Pricing wrong. The fines, as mentioned, are unlimited. This is on top of the initial 200,000 Baht fine that you’ll face just for missing the Transfer Pricing deadline, being non-compliant, submitting incorrect information, or incomplete information.

Ultimately, you need to bear in mind what’s at stake. The financial consequences could be catastrophic, but the impact will ripple out into your reputation, your investor’s confidence, and even future audits. 

Let’s face it, if the revenue department catches you out once, they’ll be keeping a close eye on you in the future while rifling through your past.

It’s not malicious. It stems partly from the attempts on behalf of the Thai government to professionalise the department. It is also partly due to assessment officers working to revenue targets. 

Assessment officers in Thailand and beyond are driven to get higher tax revenues. They want as much as they can get to meet their targets, and one mistake from you is all they need. Without robust Transfer Pricing documentation, the assessment officer will be able to adjust accordingly to meet their targets.

Of course, you’re free to dispute it, but if there’s an error in your Transfer pricing documentation, it could be a costly negotiation. Even an error by omission. Remember, your documentation is your first line of defence, but it doesn’t necessarily guarantee you safe passage through Thailand’s tax regime.

Not only is this protection against the uncertainty of whether you’ll get audited, but against how much you’ll be fined. Plenty of other countries are more than happy to hit you with anything between 100 to 300 per cent of the tax shortfall, plus interest should they feel you weren’t compliant. 

Transfer Pricing documents are your first line of defence. If it’s not there, or not correct, then you’re exposed. Once you’re exposed, the government can do what they like with you. 


This is why you need professionals 

It’s important to know when it’s time to turn to the experts. 

It’s not just for those without expert knowledge in-house. Often even the biggest multinational corporations will hire consultants. They find they gain added value from outsiders. 

For example, when you’re benchmarking against local companies, who knows the field better than the local agencies? They’ve got access to local databases, have the connections at the tax department, and get the accurate guidance from local tax departments. 

Thailand has a soft spot for companies using local advisors for their Transfer Pricing benchmarking. It isn’t mandatory, but it certainly doesn’t hurt. Chiefly, because they 

themselves are more familiar with these numbers and local requirements, and can process the whole document with much more ease and efficiency.

It’s worth mentioning the Big Four – KPMG, PricewaterhouseCoopers (PWC), Ernst & Young and Deloitte. They might be your first thought when searching for such specialised insights. You shouldn’t, however, assume that these are the only options

HLB Thailand brings over 25 years of experience to your business, with a network coverage comparable to the Big Four’s. Tax audits and consultancy services are carried out with the highest respect for business processes and the individual needs of clients. 

am a Transfer Pricing specialist having worked with multinational companies as well as local ones. For the past nine years, I’ve worked over multiple jurisdictions and seeing a lot of change in the process. 

Transfer Pricing guidelines have only ever grown more sophisticated as the world’s economy has become more intertwined. 

Beyond my five years in India, where I’ve seen the adoption OECD rules first-hand, my work has taken me through the Philippines, Cambodia, Malaysia, and most recently Thailand. It’s given me, and subsequently BDO, a crucial insight. Tax reform does not happen in a vacuum, and the need to see through a regional perspective is vital, especially in Southeast Asia. 

I’ve worked with a vast range of companies over the past nine years, spanning across wildly different sectors, industries, and functions. I’ve ensured that the unique issues they face when dealing with Transfer Pricing are addressed, and with our team of specialists, we can do the same for your business. All you have to do is ask. 


Chapter 5: How do I become compliant in Transfer Pricing?

Documentation is no guarantee of compliance. You may still face fines for your intercompany dealings and you will definitely face fines if you don’t get the documents in order. These are the first steps toward becoming compliant. 

The first step to becoming compliant is to undertake the functional, asset and risk analysis, and then you can do your economic analysis. Think of the economic analysis as a job application, and the functional, asset and risk analysis as the job description. You couldn’t write a cover letter without knowing the job description, could you?

When preparing the economic analysis, you’ll need to be spot on. This includes your chosen method for benchmarking against those of the market. 

Luckily, there are five options to choose from. These are

  • the uncontrolled comparable price method;
  • the resale price method;
  • the cost-plus method;
  • the profit split method;
  • the transactional net margin method. 

The Thai government is also keen to allow any other method beyond these five, provided you can justify it. While there’s no particular hierarchy of methods, you will need to explain to the revenue department why you rejected the other methods. 

Beyond the economic analysis, you’ll need a watertight industry overview analysis. 

Are you measuring up to global and domestic standards of industry growth? If not, there’s a good chance you’ll get the request from the revenue department as you could be profit shifting. Present the case for your successes and failures in the context of the industry as a whole. 

Finally, you’ll need the group overview that lets the tax department know where you sit in the company’s overall value chain. Again, without you’ll be in trouble. 


Planning Transfer Pricing policies 

This is relatively simple, but still a vital part of the process. It’s not about becoming compliant, it’s about staying compliant. 

Why wait until you’re already exposed to talk to professionals about Transfer Pricing? You’re only opening yourself up to more risk by doing so. It’s important to get an analysis completed before you make any transaction likely to fall under Transfer Pricing guidelines.

Come to us with a cost that you’ve got in mind. We’ll do the rest, ensuring you don’t get any nasty surprises from the tax department at the end of it all, or making sure you’re prepared if you do.

Assess before you initiate. Get a planning report together first. No one likes the idea of paying for something twice, but again – and it cannot be stressed enough – the cost of being non-compliant will be far worse than any consulting fees you face when getting compliant. 

A planning report is just the same as a Transfer Pricing document. It can be costly and time-consuming, especially if done in-house. 

The time and energy can be absorbed by HLB, and your compliance can be assured before you even enter into an intercompany transaction. It doesn’t matter how calculated it is, a risk is still a risk. 


Chapter 6: Choosing a Transfer Pricing consultancy



Remember, the law was enacted on November 18th  2018 and is effective from the accounting year starting on or after January 1 st 2019. 

The tax department hasn’t kept it a secret. The power to search companies and their financial histories has been vested in the revenue department. Lots of people, however, appear to overlook the grim reality. 

If the revenue department finds a shred of evidence that points to fraud or intentional evasion they can extend the statute of limitations. This could mean dredging up 10 years of your company’s financial history and even the prosecution of the directors who authorised it – although we’re yet to see this happen. 

This hasn’t been confirmed yet by the Thai government, but it’s likely. We’ve seen the same scenario throughout the region. 

When the time comes, everyone will need to finalise their audits, prepare their financial statements and get them to the people who know what to do with them – people like us.

Make no mistake, this is no overnight activity. You need to see specialists immediately to make sure that 2020 isn’t the year your company goes under. Rules can ruin a business, so why take that chance? 

Here at HLB Thailand, we can offer you our undivided attention, along with our unparalleled local expertise. Around the clock, we are here for you and will do everything it takes to get you compliant, keep you compliant and deal with any changes to your business as they happen. 

HLB offers the personal touch – we care about taxes, so you don’t have to worry. With competitive prices for both domestic and international businesses, HLB alone offers a one-stop specialised shop for all your tax needs. 

Rohit Sharma

Principal, Transfer Pricing


Get in touch

Share to:

Copy link:

Copied to clipboard Copy