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Thailand publishes new Country-by-Country transfer pricing reporting rules
05/12/2021
On September 30, 2021, Thailand’s Revenue Department published a new notification setting out the country-by-country (CBC) transfer pricing reporting requirements for multinational enterprises (MNE) that are undertaking business in Thailand.
The Notification of the Director-General of the Revenue Department Re: Income Tax (No. 408) will apply to accounting periods beginning on or after January 1, 2021. The new CBC report must be submitted at the same time as the annual corporate income tax (P.N.D. 50) filing (within 150 days of the end of the accounting period).
What is country-by-country (CBC) transfer pricing reporting for?
The new CBC reporting requirements have been designed to improve international tax transparency, allow the Thai Tax authorities to get a better understanding of MNEs tax obligations and perform data analysis.
This CBC reporting requirement will allow Thailand to exchange tax and financial information with other signatory members of the Multilateral Convention on Mutual Administrative Assistance on Tax Matters. The Multilateral Convention on Mutual Administrative Assistance on Tax Matters focuses on international cooperation and assistance between tax authorities from the signatory states. This convention aims to promote tax transparency, fairer tax administration, and preventing tax evasion and avoidance.
Who is required to submit CBC reports in Thailand?
The CBC reporting requirement is aimed at MNEs that do business in Thailand and at least one further jurisdiction. The applicable MNEs must have a consolidated group revenue of at least THB 28 billion (approx. USD 847 million) over a 12-month accounting period. This revenue period will be prorated for shorter periods.
In practice, any ultimate parent entities (UPEs) incorporated in Thailand are required to submit a CBC report to the Revenue Department. For any UPEs not registered in Thailand, a related entity that operates in Thailand may have to file the report on the UPEs behalf.
However, these Thai entities of a MNE group will not be required to submit a CBC report if the following criteria has been satisfied:
- The UPE which is not registered in Thailand must file a CBC report in its own tax residence; and
- The tax residence of a UPE which is not registered in Thailand must have an effective CBC reporting competent authority agreement with Thailand, allowing the reports to be shared and accessed by the Thai authorities.
Please note that it is possible for the Thai entity of a MNE to be assigned as a Thai surrogate parent entity (SPE) in order to file the reports on the UPEs behalf.
What is an Ultimate Parent Entity (UPE)?
Under the recently published CBC notification, an entity will be considered a UPE in the following scenarios:
- It directly or indirectly owns one or more other entities in the same MNE group, OR the MNE would have to comply with the requirements if it were traded on a securities exchange in that country.
- A UPE cannot be directly or indirectly owned by any other entity in the same MNE group.
- Maintains no ownership interest in any other entity, but does conduct its business through a permanent establishment registered in another country.
Are there any exemptions from filing a CBC?
A Thai entity of a MNE group is exempt from filing CBC reports with the Revenue Department if all of the following conditions are satisfied:
- The foreign UPE has appointed an SPE residing outside Thailand to file CBC reports in the SPE’s country of tax residence;
- The SPE’s country of tax residence requires the submission 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 SPE has successfully notified the competent authority in its country of tax residence of its appointment as a SPE; and
- The Thai entity has notified the Revenue Department of the appointment of the third-country SPE.
How does this affect me?
A company or entity operating in Thailand will be required to submit a CBC if the the following criteria is satisfied:
- The entity must have 2 locations i.e. undertaking business in Thailand and at least one further jurisdiction.
- The entity must generate more than THB 28 billion (approx. USD 847 million) over a 12-month accounting period.
To find out whether your company is required to comply with these new regulations, why not book a quick compliance check with one of our accounting experts. To book a consultation please visit this link.
In conclusion
The Notification of the Director-General of the Revenue Department Re: Income Tax (No. 408) will have a significant effect on MNEs operating in Thailand and adds an extra layer to the already existing compliance procedures.
To see how our team experts, who specialise in Tax compliance for Thailand can help your company navigate this new requirement, please follow this link.
Please note that this article is for information purposes only and does not constitute legal advice.
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