Taxation In Thailand
Written by admin on May 14th, 2011determined by the local authorities.
Double Taxation AgreementsThailand has concluded 52 double taxation agreements in order to provide relief from international double taxation of income. A listing of the counties and territories and their effective dates is attached in Appendix I (see end of publication).
Transfer Pricing GuidelinesIn 2002, Thailand introduced Transfer Pricing (TP) guidelines to Revenue officers for their use when examining pricing arrangements between related parties. The guidelines require the Revenue officers to be concerned with arrangements that don’t apply “market prices” between “related parties”.
The related party connection between two or more companies is determined according to:
Direct or indirect shareholding in one company by another; or
Common directors and/or management.
Under the guidelines, the Revenue Department officers are permitted to accept four kinds of pricing methods by companies as follows:
Comparable uncontrolled price (CUP) method;
Resale price (RP) method;
Cost price (CP) method; and
Other (Other) internationally accepted method.
The CUP, RP and CP methods are favoured. The use of another method is acceptable when a company can demonstrate that the first three methods cannot be applied, when the other method is internationally accepted, and when it can be appropriately applied in the circumstances.
The guidelines also set out a ‘list of 10 documents’ that the Revenue officers will require when examining a company’s TP practices and transactions. The ‘list of 10 documents’ is as follows:
1. Documentation relating to the structure and nature of the company and the international group to
which it belongs;
2. Budgets, business plans and financial projections;
3. Documentation setting out the company’s business strategies and the reasons for their adoption;
4. Documentation setting out the company’s sales and operating results and the nature of its dealings with related parties;
5. Documentation setting out the reasons for entering into significant international dealings with related parties;
6. Pricing policies and documents relating to product profitability, relevant market information, profit contributions, functions performed, assets used and risks assumed;
7. Documents setting out the reasons for the company’s selection of a particular pricing methodology or methodologies;
8. Where other methods have been considered and rejected, details of those other methods, including the reasons for their rejection;
9. Documents evidencing the negotiation process taken by the company in relation to its international dealings with related parties and the basis of the negotiations;
10. Other documentation determining the market price.
The guidelines also allow companies to enter into an Advance Pricing Arrangement (APA) with the Revenue Department. Companies wanting to make an APA can do so by submitting an application to the Revenue officers and attaching all the relevant documents pertaining to the pricing issues.
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