Thailand Transfer Pricing
The Thailand Revenue Code views a multinational enterprise (MNE) as being a “group of companies” having “mutual interests” that independent parties acting in good faith would charge in a commercial manner for the product or service. The Revenue Department of Thailand’s transfer pricing booklet Guidelines on the Determination of Market Price comprises tax laws that determine market price, methodologies, process, and documentation. The Departmental Instruction defines the term “market price” as being “reasonable and credible.”
Thailand tax authorities can price goods and services in order to prevent tax evasion caused by “manipulated transfer prices within the MNE.” The income tax return requires taxpayers to declare that its prices for material transactions are based on market prices, including calculation of net profits of juristic partnerships or corporations for income tax purposes.
The Revenue Department of Thailand employs a “direct or indirect relationship test” in ascertaining management, control, or capital, and employs “transfer pricing methodologies which are accepted internationally” based on the “most appropriate method” in calculating the market price. The taxpayer is obligated to identify the “economically important activities” of each business entity.
The taxpayer is to calculate the “appropriate gross profit” by multiplying the resale price of the property or service by the gross profit margin. The Revenue Department of Thailand has issued documentation guides, and is slow to move toward implementing bilateral APAs.