Case Update - 16 August 2016

Updated Tax and Transfer Pricing Development in Thailand

 

In the past few years, the Thai Cabinet has approved and issued a lot of new laws and policies, especially tax laws and related policies, in order to increase the ability for both established Thai companies and newly formed companies to better compete in the market, as well as to attract foreign investors to inject their money into businesses in Thailand. Moreover, the purpose of these new laws and policies is to use new technology to encourage taxpayers to pay their tax properly. In this regard, the new tax laws and policies can be summarised by the size of business, as follows:

 

1. Large-sized Business

 

Regarding the government policy to support international transactions in Thailand, there have been remarkable regulations and policies issued in recent years. The regulation of International Headquarters (IHQ: a Thai incorporated company providing specific services to its affiliate enterprises either overseas or Thailand, or performing international trade businesses to overseas customers); and the regulation of International Trading Centre (ITC: a Thai incorporated company performing an international trade business and providing services relevant to the international trade business to its overseas customers), entitle Thai incorporated companies which meet the requirements of the regulations qualifications, to tax incentives. The cabinet also recently approved the draft transfer pricing act, which will add specific transfer pricing provisions to the Revenue Code. In such regard, the said draft act would be a mandatory provision in Thailand and the taxpayers would be required to prepare the transfer pricing documents to support their arm’s length price for related-party transactions.

 

2. Small and Medium-sized Business

 

The government has been critically supporting the Small and Medium-sized Enterprises (SMEs) by granting tax exemption and privileges for the registered SMEs. There is also the current Tax Amnesty, which encourages companies to maintain accurate accounting books; and the Revenue Department will conduct tax inspections for the current accounting period or for the current tax month (they will not look back at the prior year or prior tax month). Hence, the purpose of said Tax Amnesty is to encourage entrepreneurs who have previously evaded tax to start over and be transparent and honest in the future.

 

Furthermore, the Revenue Department has a campaign to support start-up business entrepreneurs in coordination with other tax privileges policies; so that the new entrepreneurs will enjoy the said tax privileges and will be good taxpayers as they have no reason to evade tax.

 

The above developments are in line with the world’s tax trend, i.e. Thailand has the desire and is moving forward to be a digital society and economy. In such regard, the Revenue Department has started to use more advanced technology in order to facilitate all taxpayers and to administrate the taxation system to be up-to-date with the current situation. Besides, Thailand is a part of the ASEAN Economic Community (AEC); therefore, we predict that the Revenue Department will launch new policies to persuade potential investors to invest in Thailand. In this regard, the taxpayers shall have more options to perform tax planning for cross-border transactions or hybrid transactions by adopting the new tax laws or regulations, which would be issued by the Revenue Department.

 

Therefore, the taxpayers (regardless of whether large-sized businesses, SMEs or start-up businesses) should be ready and prepare themselves to be in line with the new regulations and the trend of the Revenue Department, and to comply with new provisions of laws or regulations, which would be issued by the Revenue Department to their businesses; so as to mitigate any potential risks that would arise. Moreover, adverse tax would be raised by the Revenue Department once they commence conduction of the tax inspection.

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