Advance Blog

December 3, 2020

Thailand clarifies transfer pricing rules for using internal and external comparables

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 inside 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. Whilst its purpose is to provide instructions for tax officers to follow during transfer pricing audits, the regulation also assists taxpayers in determining the approach they should take when preparing their transfer pricing documentation. 

The Ministerial Regulation gives Thailand’s 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. 

Andrew Jackomos, Co-Managing Partner and Rohit Sharma, Principal, Transfer Pricing, HLB Thailand
Andrew Jackomos is a Senior Tax Partner and Co-Managing Partner with HLB Thailand based in Bangkok. He has over 40 years of tax consulting experience of which 35 years have been in Asia (Hong Kong, Singapore and Thailand). Andrew has a Bachelor of Commerce degree from the University of Melbourne and is a member of CPA Australia. Andrew’s specialties include corporate income tax, international tax, personal income tax, value added tax, specific business tax, stamp duty and customs duty. Andrew has extensive experience in developing tax effective financing arrangements and in advising clients on cross border transactions, transfer pricing, corporate re-organisations and financial restructuring and mergers and acquisitions. In addition, he has advised numerous clients on establishing operations in Thailand as well as carrying out numerous tax due diligence assignments for potential investors in a wide range of industries including retail, banking and finance, securities, manufacturing, hotels and property funds.
Rohit Sharma, Principal, Transfer Pricing, at HLB Thailand.
Rohit is an MBA, Finance from Institute of Chartered Financial Analysts of India, Business School (IBS), Chandigarh and also holds a Bachelors Degree in Commerce from Delhi University. He is a Senior Manager in the transfer pricing department. Rohit is a Principal, transfer pricing with HLB Thailand based in Bangkok. Rohit has 8+ years’ of experience in transfer pricing across India, Malaysia and the Philippines. Rohit specialises in transfer pricing engagements for a large range of domestic and multinational clients. Previously, Rohit was engaged in advising clients on various transfer pricing issues, policies, planning, dispute resolution and documentation, etc. Leveraging on his experience and knowledge, coupled with his strong client relationship, networking, negotiation and team management skills, he is focused on client service excellence and developing new opportunities for the firm.