Thailand Transfer Pricing Strategic Thinking
Tax Insight | May 2012
For the majority of international businesses, strategic thinking for transfer pricing in Thailand requires less thinking about the Paw 113 guideline and more thinking about the “exclusively incurred for the purpose of the business” rule.
In 2002, Thailand's Revenue Department issued Instruction No Paw 113/2545 (“Paw 113”) and at that time, announced:
“It is the Government's policy to increase its revenue from foreign companies blatantly avoiding or reducing their tax liabilities in the Kingdom by implementing a new transfer pricing law.”
But no new "law" was implemented, and since the 2002 announcement, the "law" continues to prescribe the same it always has done, as follows:
Paw 113 is actually a guideline, and more so, a guideline for Revenue officers conducting transfer pricing tax audit investigations.
For international businesses that are large in Thailand and that are under the supervision of the Revenue's LTO (Large Taxpayer Administration Office), the Paw 113 guideline may be required to be considered.
But for the majority of international businesses in Thailand that are under the supervision of the Revenue Department's Area Offices (which still, after 10 years, have not yet started to do any transfer pricing tax audit investigations) the more-likely-than-not proposition is that the Revenue Area audit officers will not confront you with any requirement under Paw 113, but rather, confront you with non-allowance of expenses ... because your company is unable to prove to them that your group services charges are genuinely and exclusively necessary for the purpose of your business in Thailand.
If you would like to know a bit more about the "exclusively incurred for the purpose of the business" rule, you can refer to our Tax Insight Article Transfer Pricing Group Services Guideline.
This Tax Insight Article is general information only. It should not be used to determine any matter without consulting with an experienced Thailand tax advisor.