For many years, multinational corporations had been using the transfer pricing as one of tax planning strategies without much challenge from the Revenue Department of Thailand. Consequently, the Revenue Department lost a lot of tax revenues from the transfer pricing over those years. Therefore, in 2002 the Revenue Department issued the Departmental Instruction No. Por 113/2545 to set up the criteria to regulate the transfer pricing activities.

With this Departmental Instruction, transfer pricing should be used with care and is becoming more and more vulnerable to the tax audit by the Revenue Department.

If companies have related transactions with offshore affiliated companies at the prices not based on the arm’s length basis, they may be vulnerable to the transfer pricing investigation made by the Revenue Department.

We assist clients on transfer pricing. In order to take the preventive measure against the transfer pricing investigation, some companies prepare the transfer pricing documents, which may be submitted to the Revenue Department upon request.

First, having the transfer pricing document is a preventive measure against the request to adjust up the profit made by the Revenue Department.

Second, knowing the profit margin of its peers in the same industry gives a company with more flexibility to adjust up or down its own profit margin.

Last but not least, presenting the transfer pricing documents to the Revenue Department official will shift the burden of proof to the Revenue Department.