You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

November 25, 2021

Thailand Issues Country-by-Country Transfer Pricing Reporting Regulation

Subscribe to Updates

On September 30, 2021, Thailand’s Revenue Department released a notification prescribing country-by-country (CBC) transfer pricing reporting requirements for multinational enterprise (MNE) groups that do business in Thailand.

The Notification of the Director-General of the Revenue Department Re: Income Tax (No. 408) applies to accounting periods beginning on or after January 1, 2021, with the CBC report submitted at the same time as the annual corporate income tax (P.N.D. 50) filing (i.e., within 150 days of the end of the accounting period). For example, if the accounting period ends on December 31, 2021, the CBC report must be filed by May 30, 2022.

Background

The CBC report functions as part of a three-tier structure, together with a global master file and a local file, as recommended by the OECD’s Base Erosion and Profit Sharing (BEPS) Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting). The CBC reporting requirement targets large MNEs, with the aim of encouraging international tax transparency, improving tax authorities’ access to information on MNEs’ global allocation of income and taxes paid, and helping governments to assess high-level transfer pricing risks and conduct economic and statistical analysis.

The CBC reporting requirement will allow Thailand to exchange tax and financial information on an automatic basis with other signatories of the Multilateral Convention on Mutual Administrative Assistance on Tax Matters. This goes in tandem with the recently passed Act Amending the Revenue Code (No. 54) B.E. 2564 (2021), which empowers the director-general of the Revenue Department to exchange information with competent authorities in other jurisdictions.

Entities Required to Submit CBC Reports

The CBC report notification applies to MNE groups that do business in Thailand and at least one other jurisdiction and that have consolidated group revenue of at least THB 28 billion (approx. USD 847.6 million) in a 12-month accounting period (prorated for shorter periods).

Generally, ultimate parent entities (UPEs; see definitions below) incorporated in Thailand must submit a CBC report to the Revenue Department. For foreign UPEs (i.e., those not registered in Thailand), an MNE group member that operates in Thailand may have to file the report locally.

However, these Thai members of the MNE group will not have to submit the CBC report if the following conditions are met:

  • The foreign UPE already files a CBC report in its own tax residence; and
  • The tax residence of the foreign UPE has an effective CBC reporting competent authority agreement with Thailand, and CBC reports can be shared successfully with Thailand.

In addition, for the purposes of multijurisdictional exchange of information, a Thai member of an MNE group may be formally appointed by a foreign UPE as a Thai surrogate parent entity (SPE) to file the reports on its behalf. However, the accounting periods of the foreign UPE and the SPE must be the same, and the foreign UPE must notify the Revenue Department of the appointment of the SPE.

By formally appointing the SPE in Thailand, the MNE group may be exempt from CBC reporting requirements in other jurisdictions that have a competent authority agreement with Thailand under which CBC reports are exchanged. This is similar to the filing exemption (see below) offered by the Revenue Department.

Filing Exemptions
A Thai member of an MNE group mentioned above is exempt from filing CBC reports with the Revenue Department if all of the following conditions are met:

  • The foreign UPE has appointed an SPE residing outside Thailand (i.e., an SPE located in a third country) to file CBC reports with the competent authority of the third-country SPE’s country of tax residence;
  • The third-country SPE’s country of tax residence requires the filing of CBC reports;
  • A competent authority agreement between the third-country SPE’s country of tax residence and Thailand is in effect by the CBC report filing deadline in Thailand;
  • The third-country SPE’s country of tax residence has not reported a systemic failure regarding its information exchange to Thailand;
  • The third-country SPE has notified the competent authority in its country of tax residence of its appointment as a reporting entity; and
  • The Thai Member of the MNE group has notified the Revenue Department of the appointment of the third-country SPE.

Defining a UPE

The definition of UPE is generally based on the requirement to prepare consolidated financial statements. Under the CBC reporting notification, an entity is considered a UPE in either of the following scenarios:

  • It directly or indirectly owns enough of one or more other entities in the same MNE group that it has to prepare consolidated financial statements under accounting principles of its country of tax residence, or would have to if its equity interests were traded on a securities exchange in that country (or the Stock Exchange of Thailand if the country has no securities exchange). In addition, in order to be considered a UPE it cannot be directly or indirectly owned, in the above manner, by any other entity in the same MNE group.
  • It does not have an ownership interest (in the manner described above) in any other entity, but it conducts business through a permanent establishment in another country.
Related Professionals

Practices

Tax

Location

RELATED INSIGHTS​ 

July 30, 2024
In May and June 2024, Cambodia’s General Department of Taxation (GDT) issued two notable tax incentive packages that aim to encourage business growth in the country. The details of these incentives are outlined below. Tax Incentives for Expansion of Qualified Investment Projects The GDT’s May 10, 2024, regulation (Prakas No. 313 MEF. PrK. PD) provides income tax incentives for expansion of qualified investment projects (QIPs), including an income tax exemption for the following types of expansion: Expansion of existing production. Expansion through product line diversification within the same lines. Implementation of new technologies that enhance productivity or protect the environment. Other forms of expansion set out in future sub-decrees. The number of years for the income tax exemption depends on the investment activities of the QIP, in accordance with the business groupings provided in the Sub-Decree on the Implementation of the Investment Law in Cambodia—9 years for group 1, 6 years for group 2, and 3 years for group 3. After receiving approval for the QIP expansion from the Council for the Development of Cambodia (CDC) or one of its Provincial-Municipal Investment Sub-Committees (PMISs), the GDT will certify the income tax exemption period. The exemption begins on the date the enterprise first receives income from the QIP expansion. QIPs seeking this tax exemption need to declare the amount of money that they intend to use for the expansion. Once allowed, the company must use that money for construction materials or new production equipment before the expiration of the tax exemption period. The income tax exemption can be revoked if: The enterprise does not use the capital to expand the QIP by purchasing the construction material and new production equipment as requested for the expansion. The enterprise fails to invest the prescribed amount before the expiration of the tax exemption
Read More
March 22, 2024
Laos has returned its value-added tax rate to 10% from the 7% rate that had been observed for the last two years. The new rate was specified in Ordinance No. 003/PDT, dated March 19, 2024, and announced on the website of the Ministry of Trade and Commerce. Prior to this, the last announcement of an adjustment in the VAT rate came in the last week of December 2021, when the Ministry of Justice published the Law Amending Certain Provisions of the Laws on Tax No. 01/NA, dated August 7, 2021, in the Government Gazette. This law, which entered into force in January 2022, amended the VAT rate from 10% to 7%. Under Lao law, the ordinance is effective from its date of signing by the president of Laos (i.e., March 19, 2024). However, the tax authorities have indicated that the new rate will not be enforced immediately but will be implemented in the near future, such as when it is published in the Lao Official Gazette. This change of the VAT rate to 10% does not come as a surprise. Some international experts and organizations had been recommending that Laos adopt a 10% VAT rate given its current economic challenges, arguing that Laos should prioritize collecting tax and replenishing the state budget. This was, for instance, recommended by the World Bank in the November 2023 Lao PDR Economic Monitor. Tilleke & Gibbins will continue to monitor the situation to determine when the 10% VAT rate will be enforced. For more details on the rate changes, or on any aspect of tax law in Laos, please contact Tilleke & Gibbins at [email protected].
Read More
January 12, 2024
Thailand’s Revenue Department (RD) has issued a notification requiring electronic platforms to report their revenue from business operators on their platform. With this information, the RD intends to track business operators’ income from the sale of goods and services through electronic platforms in order to facilitate accurate and efficient tax collection. The notification, which was enacted on December 27, 2023, took effect on January 1, 2024. Under the notification, electronic platforms are required to compile a “special account” containing information on the revenue received from each business operator on their platform and submit it to the RD through the department’s electronic reporting system within 150 days of the end of the fiscal year. The notification defines “electronic platforms” as entities that intermediate between business operators (i.e., sellers of goods or providers of services via the electronic platform) and consumers for the purpose of enabling electronic transactions between the parties. This covers online marketplace operators, ride-hailing operators, food delivery operators, and so on. This reporting requirement applies to electronic platforms registered in Thailand that have (or previously had, starting from the notification’s effective date) annual revenue exceeding THB 1 billion (approx. USD 28.5 million), except for electronic platforms under the supervision of the Bank of Thailand or the Office of the Securities and Exchange Commission, such as payment service providers and cryptocurrency exchanges. Electronic platforms can appoint a third party to prepare and submit the required special account information to the RD on their behalf. Compliance Steps As the requirements established by this notification mean that the RD will now have direct access to information on the income earned by vendors and merchants on electronic platforms, these business operators—whether corporate or individual—should ensure that they faithfully disclose their earnings, submit tax payments correctly, and file income tax returns in a
Read More
December 15, 2023
As part of its membership in Lex Mundi, Tilleke & Gibbins has published an updated edition of its Guide to Doing Business in Thailand for 2023. This guide outlines the key factors for starting and operating a business in the Thai market. Issues covered include: Investment incentives Financial facilities Exchange controls Import and export regulations Structures for doing business Requirements for the Establishment of a Business Operation of the Business Cessation or Termination of the Business Labor legislation, relations, and supply Tax Immigration requirements This publication is part of Lex Mundi’s Country Guides series prepared by member firms in more than 100 jurisdictions worldwide. The guides serve as a useful resource for planning international business strategy and researching new markets. The full Guide to Doing Business in Thailand is available through the button below.
Read More