TL;DR Transfer pricing in Thailand requires related-party transactions to follow the arm’s length principle and be properly documented. Companies with revenue over THB 200 million must file disclosures, and non-compliance can lead to tax reassessments, penalties, and interest.
Introduction
For multinational businesses operating in Thailand, transfer pricing has become an area of focus for the Thai Revenue Department. The rules are now more actively enforced, and companies carrying out intercompany transactions are expected to be able to explain and support how those transactions are priced.
For multinational businesses, transfer pricing is a standard part of international tax planning. Where companies within the same group transact with each other, those transactions must be priced on an arm’s length basis, meaning they should reflect the price that would have been agreed between independent parties under similar conditions.
If pricing is not aligned with market value, tax authorities may think that profits have been moved between jurisdictions to avoid tax liabilities.
In practical terms, this means businesses need a solid understanding of Thailand’s transfer pricing framework and how it applies to their operations. This article outlines the key rules relating to transfer pricing, and what companies should be doing to make sure they are in line with Thailand’s requirements.
Key Points
- Companies with annual revenue over THB 200 million must file a Transfer Pricing Disclosure Form within 150 days of their accounting period end and maintain detailed documentation of related-party transactions.
- Thai transfer pricing regulations follow OECD guidelines and require all related-party transactions to be priced at “arm’s length” i.e. as if they were conducted between independent parties under similar circumstances.
- Companies must use one of five approved methods to calculate transfer prices: Comparable Uncontrolled Price, Resale Price Method, Cost Plus Method, Transactional Net Margin Method, or Profit Split Method.
- Non-compliance penalties can reach 200,000 baht for documentation failures, plus up to 100% of additional tax owed and 1.5% monthly interest for incorrect pricing adjustments.
- Transfer pricing audits are more likely for companies showing consistent losses, significant profit fluctuations, large volumes of related-party transactions, or dealings with low-tax jurisdictions.
What is Transfer Pricing?
Transfer pricing refers to how goods, services, and intangible assets are priced when they are exchanged between related companies within the same group. These transactions are a normal part of day-to-day business, but they also have a direct impact on where profits are recorded and how much tax is paid.
As a result, tax authorities pay close attention to how these prices are set. If they do not reflect the proper market value, there is a risk that profits are being shifted between jurisdictions in order to reduce the group’s tax burden.
In Thailand, the transfer pricing rules have been developed in line with international standards set by the Organisation for Economic Co-operation and Development. By using the OECD’s standards, Thailand can easily align with global standards and give the Revenue Department a clearer framework to review and challenge inter-company pricing where necessary.
What are the Current Transfer Pricing Regulations in Thailand?
Thailand’s transfer pricing rules have developed significantly over time. Early rules focused on the arm’s length principle, but in practice, enforcement was limited. This has now changed and Thailand’s rules are now more structured and closely aligned with international standards set by the Organisation for Economic Co-operation and Development.
Thailand is also moving towards greater transparency which requires eligible companies to submit enhanced disclosure requirements and the introduction of measures under the OECD’s Base Erosion and Profit Shifting (BEPS) framework, such as country-by-country reporting for larger groups.
These updated rules and requirements also introduced a greater focus on transparency. Eligible companies are now required to meet more detailed disclosure obligations, including measures introduced under the OECD’s Base Erosion and Profit Shifting (BEPS) framework, such as country-by-country reporting for larger groups.
What are the Key Concepts in Thai Transfer Pricing Regulations?
Thailand’s transfer pricing framework is based around the following principles:
The Arm’s Length Principle
Thailand’s transfer pricing rules are based on the arm’s length principle. This requires transactions between related companies to be priced in line with what independent parties would agree under comparable circumstances.
For example, if a company in Thailand provides management or consulting services to its parent company overseas, it cannot simply charge a minimal fee to reduce taxable profit in Thailand. The fee should reflect what an unrelated third-party service provider would charge for similar services.
If the price is set too low or too high without a clear commercial justification, the Thai Revenue Department may adjust the transaction to reflect a market rate and reassess the company’s tax position.
Related Party Definitions
Understanding whether parties are considered “related” is the first step in determining whether transfer pricing rules apply.
In Thailand, parties would be considered related when:
- Companies with direct or indirect shareholding links
- Businesses under common control, such as subsidiaries of the same parent company
- Entities where one has management influence over the other
- Other relationships defined under ministerial regulations
If a transaction involves parties with these types of relationships, transfer pricing rules will usually apply.
Covered Transactions
Transfer pricing rules in Thailand apply to a wide range of transactions between related companies, including:
- Sales and purchases of goods
- Provision of services
- Licensing of intellectual property
- Financial transactions (e.g., loans, guarantees)
- Cost-sharing arrangements
Materiality Thresholds
While transfer pricing rules apply to all related party transactions, Thailand has introduced materiality thresholds so that larger transactions are subject to closer review and must meet the required compliance standards.
The materiality thresholds will apply to businesses with an annual revenue above the threshold of THB 200 million (approximately USD 6,000,000). Companies who meet this threshold may be required to comply with these rules and meet the relevant reporting obligations. Smaller companies are not exempt from the arm’s length principle — their intercompany pricing must still be justifiable — but they may not be subject to the same level of mandatory reporting.
Transfer Pricing Methods
Thailand uses several transfer pricing methods that are aligned with OECD guidelines for determining arm’s length prices. The applicable method used depends on the nature of the transaction and the availability of comparable data.
Examples of the transfer pricing methods include:
- Comparable Uncontrolled Price (CUP) method
- Resale Price Method (RPM)
- Cost Plus Method (CPM)
- Transactional Net Margin Method (TNMM)
- Profit Split Method (PSM)
What are the Documentation Requirements and Disclosure Obligations?
In order to meet Thailand’s transfer pricing requirements, companies are required to prepare and submit specific documentation. This documentation must be properly prepared along with any supporting evidence required.
Transfer Pricing Documentation
Under Thai law, companies are expected to prepare transfer pricing documentation to support how their intercompany transactions are priced in line with the arm’s length principle. Required transfer pricing documentation includes:
- A functional analysis describing the roles, assets, and risks of each entity involved in the transaction
- An economic analysis justifying the selected transfer pricing method and demonstrating its application
- Financial information and comparability analysis supporting the arm’s length nature of the transaction
Please note that not all companies are required to submit this documentation, however, they must still prepare everything accordingly and it must be available upon request by the Thai Revenue Department.
Transfer Pricing Disclosure Form
Companies with annual revenue exceeding 200 million baht are required to file a Transfer Pricing Disclosure Form along with their annual corporate income tax return. This Pricing Disclosure Form provides details of any related party transactions and acts as a risk assessment tool for the tax authorities.
Key information to be included in the disclosure form includes:
- The nature and value of intercompany transactions
- The transfer pricing methods applied
- Whether transfer pricing documentation has been prepared
Country-by-Country Reporting
Following OECD recommendations, Thailand has introduced country-by-country reporting requirements for large multinational groups.
If a multinational group has annual global revenue of at least THB 28 billion, it must report key financial and tax information to tax authorities.
There are two main requirements in Thailand:
Notification requirement (local level)
A Thai entity within the group must notify the Thai Revenue Department each year, confirming details such as the parent company, where the report will be filed, and basic group information. This is done as part of the transfer pricing disclosure form and must be submitted within 150 days after the company’s financial year-end.
Submission of the full report (group level)
The full country-by-country report must be submitted within 12 months after the end of the group’s financial year. This is usually done by the ultimate parent company or a designated entity.
Even if the parent company is not based in Thailand, a Thai group entity still has responsibility to file the notification locally. If the Thai Revenue Department specifically requests the report, it must be submitted within 60 days.
What are the Deadlines and Submission Requirements?
In order to ensure any transactions that may be subject to the transfer pricing requirements are compliant with Thailand’s requirements, the above mentioned documents must be submitted by the following deadlines:
- The Transfer Pricing Disclosure Form must be filed within 150 days of the end of the accounting period
- Transfer pricing documentation, if requested, must be provided within 60 days
- Companies must retain transfer pricing documentation and supporting materials for at least five years from the date of submission or the date the document was prepared, whichever is later.
What are the Methods for Calculating Transfer Pricing?
Choosing the right transfer pricing method is an important part of supporting how intercompany transactions are priced. Thailand’s approach closely follows international guidance from the Organisation for Economic Co-operation and Development, which recognises several accepted methods for determining arm’s length pricing.
In practice, the method used will depend on the nature of the transaction, the industry, and the specific facts of the arrangement.
Comparable Uncontrolled Price (CUP) Method
The CUP method compares the price charged in a controlled transaction to the price charged in a comparable uncontrolled transaction under similar circumstances. This method is often preferred when reliable comparable transactions can be identified, particularly for commodity transactions or standardized products.
For example, a Thai subsidiary sells electronic components to its parent company. If the same components are sold to unrelated distributors at similar volumes, these transactions could serve as comparables under the CUP method.
Resale Price Method (RPM)
RPM is a commonly used method for distribution activities. RPM starts with the price at which a product purchased from a related party is resold to an independent entity. This price is then reduced by an appropriate gross margin (the “resale price margin”) to determine an arm’s length price for the original controlled transaction.
For example, if a Thai distributor purchases goods from its foreign parent and resells them to unrelated customers. The RPM would compare the distributor’s gross margin on related party purchases to the margins earned by independent distributors performing similar functions.
Cost Plus Method (CPM)
The Cost Plus Method is applied to manufacturing operations or service providers. CPM takes the costs incurred by the supplier in a controlled transaction and adds an appropriate cost plus mark-up to arrive at an arm’s length price.
For example, if a Thai manufacturing subsidiary produces goods for its parent company. The CPM would compare the mark-up applied to the Thai entity’s costs to the mark-ups earned by independent manufacturers with similar functions and risks.
Transactional Net Margin Method (TNMM)
TNMM examines the net profit margin relative to an appropriate base (e.g., costs, sales, assets) that a taxpayer realizes from a controlled transaction. This method is normally used when more direct methods are not reliable due to differences in products or functions.
For example, if a Thai company provides IT services to related parties. TNMM could compare the company’s net profit margin on these services to the margins earned by independent IT service providers.
Profit Split Method (PSM)
The Profit Split Method is used where transactions are highly integrated or when both parties make unique and valuable contributions. PSM allocates the combined profit or loss from the controlled transactions based on the relative value of each party’s contribution.
For example, if a Thai entity collaborates with its foreign parent on developing and marketing a new pharmaceutical product. PSM could be used to allocate the resulting profits based on each entity’s contributions to development, manufacturing, and marketing.
How to Choose the Most Appropriate Method?
When choosing a transfer pricing method, companies should consider:
- The nature of the controlled transaction
- The availability of reliable comparable data
- The degree of comparability between controlled and uncontrolled transactions
- The existence of unique and valuable contributions by each party
It’s important to note that while the Thai Revenue Department does not have a strict preference in relation to which method is used, companies should be prepared to justify their choice of method and demonstrate why alternative methods were not selected
Benchmarking Studies and Comparability Analysis
A key part of transfer pricing in Thailand is for the company to carry out benchmarking studies and comparability analyses. These are used to support how intercompany transactions are priced by comparing them with similar transactions or financial results from independent companies.
Benchmarking Studies
Benchmarking studies provide support for the pricing of controlled transactions. They help demonstrate to tax authorities that the company’s transfer prices are consistent with market practices and do not artificially shift profits between jurisdictions.
Steps in Conducting a Benchmarking Study
- Define the Transaction: Clearly identify the controlled transaction(s) being analyzed, including the functions performed, assets used, and risks assumed by each party.
- Select the Tested Party: Typically, this is the less complex entity in the transaction, for which reliable data can be obtained and analyzed.
- Choose the Transfer Pricing Method: Based on the nature of the transaction and available data, select the most appropriate method.
- Identify Potential Comparables: Search for independent companies or transactions that are sufficiently similar to the tested party or controlled transaction.
- Perform Comparability Adjustments: Make necessary adjustments to account for material differences between the controlled transaction and the comparables.
- Determine the Arm’s Length Range: Calculate the range of results from the comparable companies or transactions, often using statistical measures like the interquartile range.
- Apply the Results: Compare the results of the controlled transaction to the arm’s length range and make any necessary adjustments.
Comparability Factors
When assessing potential comparables, the following should be considered:
- Functions performed, assets used, and risks assumed
- Contractual terms of the transaction
- Economic circumstances (e.g., market size, level of competition)
- Business strategies
- Product or service characteristics
Documentation of Benchmarking Analysis
The benchmarking process requires the following information to be included:
- Search criteria and screening process for comparables
- Reasons for rejecting potential comparables
- Detailed explanation of any comparability adjustments
- Statistical analysis of the final set of comparables
Transfer Pricing Audits and Dispute Resolution
As the Thai Revenue Department continues to develop its policies relating to transfer pricing, the requirements for companies to undertake audits and potential disputes has increased.
The Transfer Pricing Audit Process
Transfer pricing audits in Thailand will include the following:
- Risk Assessment: The Revenue Department uses various factors, including the Transfer Pricing Disclosure Form, to identify high-risk taxpayers for audit.
- Information Request: Selected taxpayers receive a formal request for transfer pricing documentation and additional information.
- Document Review: Tax officials analyze the provided documentation and may request clarifications or additional data.
- On-Site Examination: In some cases, auditors may conduct on-site visits to gather further information and interview key personnel.
- Proposed Adjustments: If discrepancies are found, the Revenue Department proposes transfer pricing adjustments.
- Negotiation: The taxpayer has the opportunity to discuss and negotiate the proposed adjustments with the tax authorities.
- Final Assessment: The Revenue Department issues a final assessment, including any agreed-upon adjustments and penalties.
Common Reasons for an Audit
Certain factors may increase the chances of a transfer pricing audit. These include consistently low profitability or recurring losses compared to industry benchmarks, significant fluctuations in profit levels from year to year, and large volumes of related party transactions.
Transactions involving low-tax jurisdictions, as well as business restructurings or changes in operating models, may also attract closer attention from the Thai Revenue Department.
Dispute Resolution Mechanisms
If a company disagrees with the outcome of a transfer pricing audit, several dispute resolution options are available:
Administrative Appeals Taxpayers can file an appeal with the Tax Appeal Committee within 30 days of receiving the assessment notice.
Litigation If the administrative appeal is unsuccessful, the case can be taken to the Tax Court and potentially to higher courts.
Mutual Agreement Procedure (MAP) For cross-border disputes involving treaty partners, taxpayers can request competent authorities to resolve the issue through MAP.Advance Pricing Agreements (APAs) Advance Pricing Agreements can proactively prevent disputes by agreeing on transfer pricing methodologies with tax authorities in advance.
Penalties and Interest
Non-compliance with transfer pricing rules in Thailand can lead to significant penalties. Failure to submit the transfer pricing disclosure form, or submitting incorrect information, may result in fines of up to THB 200,000. A similar penalty can apply if transfer pricing documentation is not provided when requested.
In cases where the Revenue Department makes a transfer pricing adjustment, companies may face additional tax, together with penalties of up to 100% of the additional tax and interest charged at 1.5% per month.
Statute of Limitations
The statute of limitations for transfer pricing assessments is five years from the due date of the tax return. However, this can be extended to seven years in cases of tax evasion or fraud.
Transfer Pricing Risks for BOI-Promoted Companies
Thailand’s Board of Investment is one of the most attractive options for foreign-owned businesses operating in Thailand. It offers attractive benefits such as 100% foreign ownership, more flexible work permit arrangements, and corporate income tax exemptions for qualifying activities. Many companies that obtain BOI promotion are part of wider international group structures, with related entities in different jurisdictions, some of which may offer more favourable tax treatment.
At VB & Partners, we regularly support clients with BOI applications, accounting, tax filings, and ongoing compliance and form one of our most important areas of practice. This includes everything from initial setup to ongoing reporting and regulatory requirements.
A common misconception is that BOI-promoted companies are protected from transfer pricing scrutiny because they already benefit from tax exemptions. This is not the case. The Thai Revenue Department is aware that some BOI-promoted companies may structure their operations so that costs sit in Thailand while profits are recognised elsewhere. As a result, these arrangements are often reviewed closely. The fact that a company currently pays no corporate income tax due to BOI exemptions does not remove the transfer pricing risk, particularly because those exemptions are time-limited. Once the exemption period expires, a pricing structure that was never properly documented or justified becomes immediately exposed.
A BOI-promoted company that operates purely as a cost centre, with little or no margin in Thailand while profits or held elsewhere in the group, is more likely to attract attention from the Revenue Department. If that same company also benefits from full foreign ownership, work permit privileges, and other BOI incentives, the Revenue Department may take a particularly close interest in whether the intercompany pricing arrangements genuinely reflect the company’s actual functions, assets, and risks.
This is why inter-company invoicing should be clearly structured and properly documented from the start, as part of the BOI setup rather than an afterthought. Our team works with BOI-promoted clients to design inter-company pricing arrangements that reflect the company’s genuine contribution, are defensible under investigation, and remain aligned with both BOI obligations and broader group tax efficiency objectives.
Our Thoughts
Transfer pricing becomes more relevant as a business grows, particularly where a Thai company operates as part of a wider group. In these cases, financial information may need to be consolidated at the group level, which often involves coordination with overseas accountants who may review and question how transactions are recorded and priced.
To avoid issues, it is important that Thai accounting aligns with group reporting requirements. This requires an understanding of both consolidation processes and transfer pricing rules, so that intercompany transactions are recorded consistently and can be clearly supported if reviewed. This is true whether you are a growing business setting up your first intercompany arrangements or a well-established multinational reviewing your existing structure.
It is also worth noting that exposure is not limited to larger businesses. The arm’s length principle applies to all related-party transactions regardless of company size, and arrangements that are too aggressive or lack proper documentation are vulnerable to adjustment by the Revenue Department under Section 71 bis of the Revenue Code.
How VB & Partners Can Help
Transfer pricing in Thailand is a specialist area, and the consequences of getting it wrong are significant. At VB & Partners, we support both growing businesses and established groups in managing intercompany arrangements across jurisdictions.
Our team will assess your current related-party arrangements, identify potential exposure, and work with you to apply the most appropriate transfer pricing mechanism, ensuring your documentation is properly prepared complete, your positions are defensible, and your overall group tax strategy remains efficient and compliant.
If you would like to discuss your transfer pricing position, we invite you to speak to our team.
Disclaimer
This information is provided for general informational purposes only and is not legal, tax, or financial advice.
