On 9 December 2022, Thailand became the 95th country to sign the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MAA), demonstrating Thailand’s commitment to espouse international standards.
The CbC MCAA will come into effect for Thailand by January 2023 and Thailand will begin exchanging information with other signatory countries of the CbC MCAA in June 2023.
Country by Country Reports: An Introduction
A Country by Country Report (CbC Report) broadly captures the aggregate data on the global allocation of income, profit, taxes paid, and economic activity among tax jurisdictions in which multinational enterprises (MNEs) operate.
A CbC Report is intended by the OECD to be part of a three-tiered structure, along with a global master file and a local file, which together represent a standardised approach to transfer pricing documentation which will provide tax administrations with relevant and reliable information to perform an efficient and robust transfer pricing risk assessment analysis.
The adoption of CbC reporting is contained in Action 13 of the OECD’s base erosion and profit shifting (BEPS) framework to address tax avoidance, ensuring that profits are taxed where economic activities generating the profits are performed and where value is created. CbC reporting will help in high-level transfer pricing and BEPS risk assessments.
To facilitate the exchange of information through the CbC Report by tax authorities of various countries, the CbC MCAA was put in place in January 2016. The OECD emphasized that the exchange of information through the CbC Report amongst CbC MCAA signatory countries will be strictly subject to confidentiality and data safeguarding rules. This will be achieved through the incorporation of appropriate provisions in domestic tax legislation together with other provisions relating to the use of information exchanged and the avoidance of disputes that may arise on account of double taxation.
Country by Country Reports: Thai Perspective
Signing of the CbC MAA follows Thailand’s commitment to implement the BEPS minimum standards when it became a member of OECD’s Inclusive Framework on BEPS in June 2017.
On 30 September 2021, the Director-General of the Thai Revenue Department released Notification No. DG 408, in line with the BEPS Action 13. The notification detailed the applicability of the CbC Report framework in Thailand and guides taxpayers on matters such as who is impacted by the notification, the filing obligations, the format of the CbC Report, the means of filing the CbC Report, and the timelines.
An MNE group that has consolidated group revenues of not less than THB 28 billion in the immediately preceding accounting period is obligated to prepare and submit a CbC Report.
The CbC Report must generally be filed no later than 12 months after the last day of the fiscal year to which the report relates. For example, a CbC Report for the fiscal year ended December 31, 2021 must be filed no later than December 31, 2022.
In 2022, the Revenue Department introduced a new section in the Transfer Pricing Disclosure Form, which required Thai taxpayers to provide information in relation to CbC Report filings. The filing of the Transfer Pricing Disclosure Form is mandatory for corporate taxpayers with annual revenues exceeding THB 200 million.
The Revenue Department has created a page dedicated to CbC Reporting here.
How does this impact MNEs?
It is significant to mention that the signing of the CbC MCAA does not imply that Thailand will automatically exchange CbC Reports with all the CbC MCAA signatory countries. These countries will automatically exchange CbC Reports with each other on a bilateral basis if the countries mutually agree on the same.
With this latest development, it is noteworthy that MNEs should proactively reassess their global operations together with tax reporting in order to ensure alignment with their economic value and supply chain. This will necessitate enhanced consistency and transparency in the reporting and documentation of the MNEs’ economic activities globally as well as at the local level. Any material deviation of facts in relation to the business operations forming part of the local TP documentation of an entity from its MNE group’s CbC Report will lead to severe tax consequences and penalties.