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THAILAND’S EXPERIENCE ON TRANSFER PRICING

THAILAND’S EXPERIENCE ON TRANSFER PRICING. UN Expert Group Meeting on TP Issues for Developing Countries. 14 March 2012. Presentation covers. 1 . Transfer Pricing Development in Thailand 2 . Relevant Law and Guidelines 3 . Thailand’s Approach to Transfer Pricing

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THAILAND’S EXPERIENCE ON TRANSFER PRICING

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  1. THAILAND’S EXPERIENCE ON TRANSFER PRICING UN Expert Group Meeting on TP Issues for Developing Countries 14 March 2012

  2. Presentation covers 1. Transfer Pricing Development in Thailand 2. Relevant Law and Guidelines 3. Thailand’s Approach to Transfer Pricing 4. Conclusion and Future Direction

  3. 1 1. Transfer Pricing Development in Thailand

  4. A 10 year journey… • 2002 Released Transfer Pricing regulation • Departmental Instruction No. 113/2545 subject : Corporate • Income Tax - TheDeterminationofTransferPricebasedon • theMarketPrice • 2003 Established Transfer Pricing Division under Bureau of • Large Business Tax Administration • Established APA Committee and Working Team • 2006 Commenced competent authority meeting on APA • 2008 First 2 APA cases reached agreement • 2010 Released APA Guidelines for taxpayers • 2012 Due to commence competent authority meeting on • corresponding adjustment

  5. 2. Relevant Law and Guidelines 2

  6. 2.1 The Revenue Code No provision specifically for transfer pricing Apply provisions that deal with gratuitous transfer or transfer with unreasonably low consideration

  7. 2.2 Departmental Instruction No. 113/2545 issued on 16 May 2002 Market price standard for related transaction Guideline on how to apply the arm’s length principle to related transactions between associated enterprises

  8. 2.3 Thailand’s DTAs Art 9 associated enterprises & corresponding adjustment Art 25 MAP (transfer pricing disputes and APA) 2.4 Standard Accounting Revenue Recognition using fair value to measure revenue.

  9. 3. Thailand’s Approach 3

  10. 3.1 Departmental Instruction – meant to be short term measure Difficulties in practice with lack of specific law on TP • Market price vs Arm’s length price • Adjustment procedures • Value added tax • Penalties • Statute of limitation • Advance Pricing Arrangement

  11. 3.2 Bilateral APA – aims to eliminate international double taxation However, it necessitates sharp learning curve  Negotiations against more skilled and experienced experts

  12. 3.3 Business environment in Thailand • Contract manufacturer model • Problems with comparability and functional analysis • Domestic profit shifting due to investment promotion schemes • Residence countries of parent companies seek to shift profits away from Thailand

  13. 3.4Organisation structure of the Revenue Department • shortage of personnel • no permanent organization to support MAP and APA

  14. 4. Conclusion and future direction 4

  15. 4. Conclusion and future direction 4.1 Amendment of law to include specific TP legislation 4.2 Creation of MAP Office within International Tax Division with full time staff to handle APA cases 4.3Training and manuals to enhance standard operations 4.4 Decentralising TP audit 4.5 Enhance relationship and partnership with taxpayers and consultant companies as well as foreign tax authorities

  16. THANK YOU

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