- Transfer pricing: Alert for companies earning a minimum revenue of 200 million Baht during the financial year must file a Transfer Pricing Disclosure Form together with its annual corporate income tax return.
- Personal Income Tax and Corporate Income Tax: The Thai Revenue Department has updated benefits for individual taxpayers, companies and juristic partnerships.
Transfer Pricing "TP" Disclosure Form: Alert for companies earning a minimum revenue of 200 million Baht during the financial year must file a Transfer Pricing Disclosure Form together with its annual corporate income tax return.
Companies earning a minimum revenue of 200 million Baht during the financial year must prepare and file a transfer pricing disclosure form (“TP disclosure form”) along with its annual corporate income tax return. The filing must be done within 150 days from the end of the accounting period.
BDO Insight: The TP disclosure form is used by the TRD as a risk assessment tool to evaluate if the Company’s related party transactions comply with the arm’s length standard. Non-submission, filing of incorrect information, and late submissions will all be subject to a penalty.
In November 2020, two Ministerial Regulation Numbers 369 and 370 (MR No. 369 and No. 370) were issued providing clarification to the transfer pricing provisions of the Thai Revenue Code.
The MR. No. 369 grants TRD officers the right to adjust income and/or expense of companies if and when a profit shifting between related parties is proven. The MR suggests comparing the “commercial and financial terms” of a related party transaction with an internal or external comparable, and not just the pricing policy.
BDO Insight: The test for comparability of “commercial and financial terms” are more extensive than a profit margin test. It is recommended that companies review their policies to ensure compliance with this requirement. Also, companies normally enter into a related party transaction using standard group terms, instead of going through a negotiation process and agree on specific terms and conditions, which companies would necessarily do if they were unrelated.
While transfer pricing requirement adds burden to an already onerous tax reporting compliance, a pro-active approach in formulating a transfer pricing policy ultimately helps companies regularize their related party transactions and in having a more cost-efficient supply chain.
The MR. No. 370 was issued to clarify that companies with an income of less than 200 million Baht do not have to file a transfer pricing disclosure form.
BDO Insight: Regardless of the above clarification, all taxpayers with significant related party transactions are advised to prepare a TP documentation to support its inter-company transactions. This is especially true if the company is planning to request for a tax refund that necessitates a full tax audit.
Personal Income Tax and Corporate Income Tax: The TRD has updated the benefits for individual taxpayers, companies and juristic partnerships.
Personal Income Tax - Interest expense from loan.
On 24th December 2020, Notices of Director-General of Revenue Department (“DG”) were issued granting personal income tax deduction for interest incurred from loans for buying, hire purchasing, or constructing residential building. It covers year 2021 onwards. The conditions are as follows:
Taxpayers must inform the TRD within the prescribed timeline and present the relevant evidence showing payment of the interest.
For loan agreements entered into with: (i) a bank; (ii) a finance company, securities company and credit company; (iii) an insurance company; or (iv) secondary mortgage entity, the following conditions must be complied with:
- For loan agreements made on or after 1st January 2021, the individual taxpayer must inform the lender about its intention to claim tax deduction on interest expense.
- For loan agreements made before 1st January 2021 – if the individual taxpayer did not inform the lender to use such tax deduction, he/she must have an evidence of interest payment from its lender.
Corporate Income Tax – withholding tax system.
On 12nd January 2021, the Cabinet has approved the reduction of withholding tax rates from 5% and 3% to 2% for taxpayers using the e-Withholding tax system. It is effective from 1st October 2020 to 31st December 2022.
Companies are also allowed to deduct the investments made in implementing the e-Withholding tax, e-Tax invoice, and e-Receipt systems twice (200%) the amount for tax purposes. It is effective from 1st January 2020 to 31st December 2022.
BDO insights: These measures are provided to encourage companies to adopt electronic tax systems.
Electronic filing of tax returns
Companies and juristic partnerships registered in Thailand, which are interested in filing tax returns using the online platforms of the TRD, may register for e-filing with the Department of Business Development (“DBD”). The DBD will send the login information to the registered electronic mail provided by the company or juristic partnership. This can be used in filing the annual corporate income tax return, mid-year corporate income tax return, transfer pricing disclosure form and monthly tax returns. This is effective starting 1st February 2021.
BDO insights: This measure aims to harmonize and simplify the registration procedure in Thailand.