Public get their say on draft of the Transfer Pricing Act
IN LIGHT of global transfer-pricing trends, the government has been increasingly focused on transfer pricing. There has been significant progress made in developing transfer-pricing regulations, which is a sign that the government has wielded a firm hand in attempting to address transfer-pricing issues.
Thailand actually introduced transfer-pricing guidelines in 2002 in the form of Departmental Instruction No Paw 113/2545, which is not a law.
The first draft of the transfer-pricing regulations was approved by the Cabinet in May 2015 and then passed to the Council of State, which gave it the green light late last year.
On June 19, the Revenue Department opened an online public hearing for the revised draft of the Transfer Pricing Act. Comments can be submitted until tomorrow.
The act is aimed at amending the Revenue Code to crack down on tax evasion from transfer pricing between related parties, and to provide guidelines on determining a market price to be in line with international standards and fairness in taxation.
The revised draft will add more provisions – Section 35 ter, Section 71 ter and Section 71 bis – to the Revenue Code.
The key points in the revised draft are as follows: Tax officials will be granted the power to adjust the assessable income and allowable deductions of an entity that had entered into a transaction with a related entity under different commercial and financial conditions from a transaction between independent parties.
“The definition of the “Related Entity or Related Juristic Partnership’ is consistent with the Departmental Instruction No Paw 113/2545, plus it has been expanded to include at least 50 per cent direct and indirect capital shareholdings.
An entity with related-party transactions that has income exceeding the threshold will be required to submit a report outlining the nature/relationship and quantum of related party transactions by the annual tax return filing deadline and submit the transfer pricing documentation within 60 days or the extended period of 120 days upon the receipt of notification from the tax authority.
An entity may request a tax refund within three years from the tax return submission date or within 60 days after the receipt of an adjustment notification from a tax officer.
An entity failing to comply with Section 71 ter or submitting incomplete or incorrect documentation without reasonable explanation may be fined up to Bt200,000.
In anticipation that the transfer pricing regulations will be enforced, taxpayers with related-party transactions are recommended to evaluate transfer-pricing risks now and take actions to address them as well as prepare the required transfer-pricing documentation.
ABHISIT PINMANEEKUL is a tax partner of KPMG in Thailand.
