Offshore Income Tax Update
The New Practice for Offshore Income Brought into Thailand
Understanding transfer pricing
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On 18 November 2019, the Director General has officially published the Transfer Pricing Disclosure Form (“the TP Disclosure Form”) in the Notification of Director General of the Revenue Department. The TP Disclosure Form is applicable from 1 January 2019 onwards.
A company that has relationships with other related companies as prescribed under Section 71 bis Paragraph 2 of the Revenue Code with total revenue greater than 200 million Baht for an accounting period starting from the financial year ending on or after 31 December 2019, must submit the TP Disclosure Form on intercompany transactions accompanied with their annual corporate income tax return. This must be completed within 150 days from the closing of the accounting period in accordance with the Section 71 ter of the Revenue Code.
A taxpayer who fails to submit the TP Disclosure Form by the due date or submits the TP Disclosure Form with incorrect or incomplete information without a reasonable cause, will be subject to a maximum fine of Baht 200,000 (not including any other tax shortfall penalties).
According to Notification of Director General of the Revenue Department, the key information required to fill out in the TP Disclosure Form consists of follows:
- A Taxpayer Identification Number and accounting period
- The currency used for operations; (Regarding to Section 76 ter of the Revenue Code, a company that adopts a foreign currency shall obtain an approval from the Director General of the Thai Revenue Department); and
- The information between a taxpayer and related juristic companies or partnerships
Part A – List of related juristic companies or partnerships
This section requires the list of the related juristic companies or partnerships that operate in Thailand and overseas.
Part B – The value of Related Parties Transaction
This section mainly requires a taxpayer to declare the value of related party transactions between a taxpayer and related juristic companies or partnerships that operate in Thailand and overseas. The details of the related party transactions based on the nature of income and expenses as follows:
- The value of operate income;
- The value of purchase of raw materials and finished goods;
- The value of land, building and equipment acquisition;
- The value of other expenses (i.e., royalty fee, interest expense and others); and
- The value of loan received/ loan provided related juristic companies or partnerships at the end of accounting period
Part C – Other information
This section requires the necessary information which is specific on transfer pricing matters by checklist about the preparing consolidated financial statements (the Tax Authorities may request a Master File), business restructuring and disposal and transferring of intangible assets between a taxpayer and related juristic companies or partnerships during the accounting period.
The TP Disclosure Form also requires a certification of the accuracy and completeness of the related party transactions along with the completeness of supporting documents for all transactions that fill in the TP Disclosure Form. Hence, it is highly recommended that the Local File and /or supporting documents for all transactions should be available and kept in places in order to mitigate transfer pricing risks that might trigger a tax audit adjustment and resulting penalties by the Revenue Department.
Contact our team to find out more about how this will apply to you.