泰国《转让定价》

繁星追梦

Preface
International business transactions have increased dramatically over the years. Investment has increasingly expanded at an unprecedented rate in many countries. These international business activities have led to the formation of a group of companies with mutual interests which is known as "multinational enterprise" (MNE). Companies within the MNE may trade goods or services with one another by means of "Transfer Pricing".


The Revenue Department is aware of practical problems in calculating the market price. Therefore, the booklet "Determination of Market Price for Multinational Enterprises" is accordingly written to provide businesses with guidelines in determining acceptable market prices in accordance with international principles. The preparation of adequate documentation will save time and reduce the burden of proof on the market price to the Revenue Department.


This booklet comprises of four parts. Part I describes related tax laws in determining the market price. Part II explains methodologies in calculating the market price, whilst Part III provides process in establishing the market price. Lastly, the list of documentation that should be kept is suggested in Part IV.


The Revenue Department of Thailand
June 2002

繁星追梦

Multinational Enterprises and Transfer Pricing
International business transactions have increased dramatically over the years.  Investment has increasingly expanded at an unprecedented rate in many countries. These international business activities have led to the formation of a group of companies with mutual interests which is known as "multinational enterprise" (MNE).  Companies within the MNE may trade goods or services with one another by means of   "Transfer Pricing".

Transfer Pricing is the price set between related contracting parties for goods or services which may deviate from the market price.
What is a Market Price or Arm's Length Price?
A market price or arm's length price is the price of consideration, service fee, or interest which independent contracting parties acting in good faith would charge in a commercial manner for the same characteristics, categories or types of property, service or loan that are transferred or provided on the date of the transfer of property, provision of service, or lending of fund.

Tax Legislation on Transfer Pricing
       In order to prevent the evasion of taxation caused by manipulated transfer pricing within the MNEs, tax authorities can price goods and services by applying the provisions of  Section 65 bis (4) (7), Section 65 ter, and Section 70 ter under the Revenue Code, Double Tax Agreements between Thailand and other countries, as well as Standard Accounting No. 37 and 47. Moreover, the Revenue Department recently issued Departmental Instruction No. Paw 113/2545, - Subject : Corporate Income  Tax - The Determination of Transfer Price based on the Market Price, in order to provide tax officials with a standardized guideline on how to determine the transfer price based on the market price. The Departmental Instruction is divided into the following sections.

Criteria for the Calculation of Net Profits of Juristic Partnerships or Corporations for Income Tax Purposes
Assessment of Revenue and Expenses Based on the Market Price
Methodologies in Determining the Market Price
Documentation that should be prepared
Advance Pricing Arrangements (APAs)

Methodologies in Calculating the Market Price
The transfer pricing methodologies which are accepted internationally are as follows :

1.Traditional Transaction Methods
  Comparable Uncontrolled Price Method
  Resale Price Method
  Cost Plus Method
2.Transactional Profit Methods
  Profit Split Method
  Transactional Net Margin Method

Process in Establishing the Market Price
Taxpayers are advised to apply four steps to implement a process for setting the market price.  The four steps link the arm’s length principle, questions of comparability and the transfer pricing methodologies into a process that takes into account of the facts and circumstances of the taxpayers and assists in the collection and analysis of information as well as the documentation of the results and process of each step.

Step 1  Characterise the international dealings between related parties.

The identification of the scope, type, value and timing of international dealings with related parties.  In this regard, the following details need to be made.

1.1 Organisational structure and relationship between business entities within the same group, operation plans, minutes of the meetings of board of directors or executives;
1.2 External factors affecting the business such as nature of industry and market conditions, structure and nature of the competition, distributors, customers, new competitors, and other economic factors affecting the business.
1.3 Intangible assets used and their ownership; and
1.4 Details of the transactions with related parties, describing characteristics of property and service, value, and other contractual terms.

The identification of the economically important activities and description of operations of each business entity.

2.1 Functions performed, indicating the economically significant functions or activities;
2.2 Assets used, both tangible and intangible assets including human resources and nature and extent of its use; and
2.3 Risks assumed by each of the parties.

Step 2  Select  the most appropriate method in calculating the market price

Identify the data that may establish the market price for the transaction between related parties.
Determine the most appropriate methodology in calculating the market price based on the facts and circumstances of the particular case.

Step 3  Apply the method selected in Step 2 and calculate the market price.

The objective of Step 3 is to apply the methodology selected in Step 2 to calculate the market price that is reasonable and credible. It is necessary to consider the data obtained from Step 1 to enable comparability to be properly assessed.  

Taxpayers should:

Adjust data to eliminate material differences, for example accounting policies of each country may be different.
Group data in the same format.
Extend the analysis over 3 - 5 years in order to observe irregularities which may affect the business.
The market price calculated under this step may be a single price or a range of results.

Step 4  Review the process from Steps 1 - 3 to ensure the use of the appropriate methodology.

After the market price was decided under Step 3, whether in the form of a single price or a range of results, the taxpayer shall review the process in Steps 1 - 3 to ensure that the selected methodology is appropriate. If the methodology is appropriate he shall apply the calculated market price to the present and future transactions with related parties.

Nevertheless, if material changes occur that affect the calculated market price, i.e. the information or selected methodology is outdated, an event occurs that directly effects the assumptions used, or better information or information sources for comparability analysis is found, taxpayers must once again apply Steps 1 - 4.

Documentation
Taxpayers are well advised to prepare contemporaneous documentation indicating steps and rationale in determining  the market price during  each stage of a transaction, and retain them at their office.

The list of documentation which should be prepared and kept is as follows:

Documentation indicating the structure and relationship between business entities within the same group, including the structure and nature of business carried on by each entity;
Budgets, business plans and financial projections;
Documentation indicating taxpayers’ business strategies as well as the reasons for adopting such strategies;
Documentation indicating sales and operating results and the nature of its transactions with business entities within the same group;
Documentation indicating the reasons for entering into international transactions with business entities within the same group;
Pricing policies, product profitability, relevant market information and profit sharing of each business entity. Consideration should be given to functions performed, asset utilized and risks assumed of the related business entities;
Documentation supporting selection of a particular pricing method;
Where several methods are considered, documentation indicating details of the methods apart from the method stated in 7 and the reasons for rejection of these methods. These documents should be created at the same time the decision is made to select the method in 7;
Documentation used as evidence indicating the negotiation positions taken by the taxpayer in relation to the transaction with business entities within the same group and the basis for those negotiating positions;
Other related documentation in determining the transfer price (if any).

Note :    This translation is for those who are not familiar with the Thai language.  The Thai text is an official text.

繁星追梦

Guidelines on the Determination of market price
On 16th May 2002, the Revenue Department issued guidelines on the determination of Market Price (Departmental Instruction No. Paw 113/2545) for the Revenue Department's officers in order to provide officials with a guideline of market price principles and how to obtain a market price.

Departmental Instruction No. Paw 113/2545 empowers Revenue officers to adjust company's revenue and expenses when calculating Corporate Income Tax if a company receives no compensation or receives at the amount less than market price without justifiable reasons or pays expenses at the amount more than market price without justifiable reasons.

The instruction provides a definition of market price which is consistent with Arm's Length principle under OECD's transfer pricing guidelines. Market price under this instruction means the price that would be charged between independent parties at the date of transaction for the sale of assets, provision of services or lending of funds under the same circumstances.

Pricing methods that the Revenue Department accepts are as follows :

Comparable Uncontrolled Price Method
Resale Price Method
Cost Plus Method
Other methods if any of the above methods cannot be applied, including profit based methods adopted by OECD such as profit-split method, transactional net margin method and any other methods that are internationally accepted.
The instruction also gives list of documentation that taxpayers should prepare when the transactions are made and submit to the official upon request during the transfer pricing examination. These documentation will help avoiding disputes between taxpayers and officials. Documentation includes :

1.documentation establishing the structure and relationship of a business within the same group, including the business nature of each company;
2.budgets, business plans and financial projections;
3.documentation establishing the business strategies and the reasons of their adoption;
4.documentation establishing the sales, operating results and the nature of its dealing with associated enterprises;
5.documentation establishing the reasons for entering into international dealings with associated enterprises;
pricing policies, documents relating to product profitability, relevant market information and profit contributions of each party;
documentation establishing the reasons for selection of pricing methodology or methodologies;
in the case where several pricing methodologies can be adopted, there must be documentation establishing details of other methodologies, and reasons for the rejection of using such methodologies;
documentation evidencing the negotiating positions taken with associated enterprises; and
other documentation that is relevant to the pricing methodologies, if any.
The rule of "Advance Pricing Arrangement" or APA is also available for taxpayers. APA is an agreement between taxpayers and the Revenue Department of the pricing methodology that would be used in future transactions between related parties.

For more information, please contact : transfer_pricing.wg@pasi.rd.go.th

繁星追梦

GUIDELINE ON APA PROCESS