Thailand Transfer Pricing Scheme

Initiated by the OECD in 2013 and endorsed by the G-20, the OECD’s “Action Plan to Address Base Erosion and Profit Shifting (BEPS)” includes 15 key areas to encourage more transparency, better reporting and more cooperation between countries in which multinational companies operate. {read: money is ‘slipping away’ from high tax jurisdictions through transfer pricing and we need to pressure south east asian countries to cooperate.}

Certain countries in Southeast Asia, namely Thailand, Malaysia and the Philippines, may adopt some measures but it is expect that others, such as Cambodia, Laos and Myanmar, have no engagement on BEPS.

Approved by the Cabinet in May this year and soon to be enacted, the Thai transfer-pricing law should be an interesting development. In general, Thailand has a relatively law transfer pricing law that allows for Thailand to remain an attractive hub for doing business. That being said, the accounting is already complex and adding more complexity doesn’t appear to be a sound measure.

Does the Thai revenue department really want to change a tax scheme for a country which has had ~>3% growth in it’s GDP year over year?

Transfer pricing is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price. Within the context of Thailand, it will likely affect the trade between similar companies where they trade within arms length – or between related parties. For instance, where a Thailand company trades with a HK, MY or SG headquarters, the owners may be in for a rude awakening during an audit.