Thailand Transfer Pricing Group Services Guideline
Departmental Instruction No Paw 13/2529 is the Thailand Revenue Department's transfer pricing group services guideline.
It prescribes that, for group services charges from a head office or another office in a foreign country to be allowed as expenses in Thailand, the services charges must comply with the following seven specific rules:
Charges for assistance or services must be for actual assistance or services rendered for the purpose of the business in Thailand;
Charges for research/development must be for research/development that is actually done for the purpose of the business of the business in Thailand, or the results of the research/development actually applied for the purpose of the business in Thailand;
Charges that have been treated as expenses for computing the net profit for a head office or another office in a foreign country must not be allowed as expenses in Thailand;
Charges that are an allocation of costs by a head office or another office in a foreign country to the business in Thailand must comply with generally accepted rules and methods and must be consistent with the allocations of costs to other branches in other countries;
Charges must not be the specific costs of a head office or another office in a foreign country such as office rent, water, electricity utility costs, appliances and equipment costs, and depreciation of appliances and equipment, etc;
Charges must be substantiated by documentary or certificate evidence that is issued by an appropriate authority of the foreign country or issued by an other reliable person acceptable to the Director-General of Revenue; and
Such documents or certificates shall contain information in sufficient detail to prove the expenses are genuinely necessary and exclusively incurred for the purpose of the business in Thailand.
It also prescribes (in a paragraph following these seven rules) that these rules shall not affect the rules for computing net profits under Agreements for the Avoidance of Double Taxation that are entered into between the Government of Thailand and the Governments of foreign countries.
Departmental Instruction No Paw 13/2529 has, for many years, been one of most problematic tax issues for international corporations in Thailand with the Revenue Department's tax audit officers disallowing group services charges on the basis of the seven rules in the Instruction and blatantly ignoring the rule in the Instruction that provides rights to international corporations under Double Tax Agreements.
Sherrings points out to international corporations that the rule for computing net profit under Thailand's Double Tax Agreements, which the Revenue Department's tax audit officers ignore, is as follows:
“In determining the profits of a permanent establishment, there shall be allowed as expenses, expenses that are incurred for the purpose of a permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere”.
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