Tax News No. 258 June 2018

Tax News No. 258 June 2018

Index of legal movement in relation to business

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Update situation on Amendment of Revenue Code on Transfer Pricing

On 5 June 2018, the Cabinet proposed a draft of Amendment Act on Revenue Code (No…) B.E. … to the National Legislative Assembly having been preparing for the consideration on agenda 1. The purpose was to consider rules in corporate-income-tax imposition in the case of pricing determination of transfer of property, provision of service, or provision of loan (“transfer pricing”) between companies or juristic partnership (“juristic person”) having mutual relationships as to whether or not and how such transfer pricing shall be determined different from the transfer pricing of independent companies or juristic partnership. In addition, such transfer pricing of the juristic person shall not result in tax avoidance. The essence of the draft is as follows:

  1. The draft of Paragraph one of Section 71 Bis states that an assessment officer has authority to adjust revenue and expenses of companies or juristic partnership having mutual relationships and having mutual commercial or financial requirements. The amount of revenue and expenses of the juristic person shall be ｃthat of independent companies or juristic partnership.
    The Director-General of Revenue Department shall prescribe Ministerial Regulation on rules, procedures, conditions on revenue and expense adjustments of companies or juristic partnership having mutual relationships (within 60 days as of the date when this draft of Amendment Act enforces), the matters of which are the following (1) Definition of “Controlled transaction” “Uncontrolled transaction” “Transaction requirements” “Advance pricing arrangement” (2) Consideration on requirements of transactions between mutual related juristic person in pursuance of Arm’s Length principles (3) Types of transaction being able to comparability analysis (4) Transfer pricing methods (5) Calculation of Arm’s Length range in case the inspected juristic person would operate independently (6) Authority of revenue and expense adjustments of an assessment officer in case the juristic person’s transactions are not under Arm’s Length range (7) Juristic person having mutual relationships under Double Tax Agreement can request Thai and Foreign Tax authority to make an agreement on advance pricing arrangement (8) Requirements of special transactions.
  2.  The draft of Paragraph two of Section 71 Bis provides the definition of companies or juristic partnership having mutual relationships as follows:
    (1)    A juristic person holds shares of another juristic person not less than 50 percent of total capital or;
    (2)    A shareholder shareholding of a juristic person not less than 50 percent of total capital holds shares of another juristic person not less than 50 percent of total capital or;
    (3)    Juristic persons having mutual relationships in capital, management, control, and a juristic person cannot independently operate its own business separately from the other juristic person.
  3.  The draft of Paragraph three of Section 71 Bis states that companies or juristic partnership adjusted revenue or expenses according to the assessment of the officer, paid for tax, and remitted tax either in excessive amount or with no liability to do so. The companies or juristic partnership can file application for request of tax refund within 3 years as of the last date of scheduled-tax-return filing or within 60 days as of the written notice date on the adjustments issued by the assessment officer.
  4.  The draft of Paragraph one of Section 71 Ter states that companies or juristic partnership shall prepare a report on information of mutual related companies or juristic partnership, and on values of mutual transactions in each accounting period.
    The Director-General shall issue Ministerial Regulations (within 60 days as of the date when this draft of Amendment Act enforces) on an income threshold of companies or juristic partnership which is not subject to this section and is not required to submit the abovementioned report. The Director-General also issue Notification of Director-General regarding income tax in the matters of a form of the report on information of mutual related companies or juristic partnership, as well as rules procedures and conditions on preparing and submitting documents for analysis of transaction requirements of mutual related companies or juristic partnership (within 30 days as of the date Ministerial Regulations under Section 71 Bis and Section 71 Ter enforce).
    The draft of Paragraph three of Section 71 Ter provides that companies or juristic partnership, of which income derived from business or as a result of the business in an accounting period is more than 30 million Baht and not exceeding the amount as prescribed by Ministerial Regulation under Section 71 Ter, shall not prepare the report.
  5.  The draft of Paragraph two of Section 71 Ter states that an assessment officer approved by Director-General may send a written notice to request mutual related companies or juristic partnership to submit documents or evidence on necessary information for the analysis of transaction requirements within 5 years as of the submission date of the information of mutual related companies or juristic partnership. Such juristic shall execute within 60 days as of the written notice date, or if there is necessary cause, the Director-General can extend the period to be able to submit not exceeding 120 days as of the written notice date.
  6.  The draft of Section 35 Ter states that a juristic person, who fails to comply with Section 71 Ter or submits the report, documents or evidence under Section 71 Ter incompletely, incorrectly without justifiable reason, shall be fined not exceeding 200,000 Baht.
  7.  The draft of Amendment Act also provides that rules in corporate-income-tax imposition for transfer pricing of companies or juristic partnership having mutual relationships shall come into force for the accounting period starting on or after 1 January 2019 onwards.

Draft the Act on Prevention and Suppression the Use of Forced Labor

On 1 May 2018, the Cabinet passed a resolution on approval for principles of the draft of the Act on Prevention andEradication the Use of Compelled Labor or Forced Labor B.E. … as proposed by Ministry of Labor. At the moment, this draft is being considered by the Office of the Council of State. The essence of the draft is to

  1.     Define the word “Compelled labor or forced labor” as any type of work or service which compels a person to work involuntarily withcoercing or punishing the person.
  2.    Define the offense on use of compelled labor or forced labor. The offense means an illegal action with coercion or oppression to a person so that the person can work or provide service involuntarily for an employer or a third party. The employer alsothreatens, coerces that the person will be illegally punished as well asthe employer uses force, applies unfair punishmentor disciplinary measures, and deprives of rights unjustly (such as holding personal identification information of the person, forcing the person or other persons to be bound with obligation illegally). Consequently, the person cannot resist or has to perform the work involuntarily
    (Please be noted that we have to take an offense on human trafficking under the Act on Prevention and Suppression Human Trafficking B.E. 2551 (2008) into account first. If the employer’s action is not fallen into the offense on human trafficking, then this action can be regarded as the offense on use of compelled labor or forced labor.)
  3.    Provide measures on prevention and eradication the used of compelled or forced labor, and measures on assistance and protectionthe security of an injured person who is a compelled or forced labor. An official (such as police) can inspect a person,look into vehicles, and enter into a private or any place where the official believes that there is evidence on use of forced labor. In addition, there is assistance for the injured person; for example, the police provides a temporary shelter, Minister of Labor extends a period of staying in Thailand temporarily for a foreign injured person and authorized the foreign person to obtain a temporary work permit, the prosecutor protects legal rights of the injured person (such as rights on claim for compensation).
  4. 4.    Provide decent and suitable punishmentfor illegal action, such as committing an offense to a child, a pregnant woman, a person who is disabled or have mental deficiency, including causing severe injured, infectious disease permanently, or death. In addition, a director or a manager who is authorized to act on behalf of a juristic-person employer, he shall be jointly liable to the injured person with the juristic-person employer.

 

 

Interested tax news

Supreme Court Judgment No. 7146/7147/2016

Shall the transfer amount of loan claim lower than accounting values be the transfer amount lower than a market price?

Emergency Decreefor Amendment of the Revenue Code(No. 19)B.E. 2561 (2018)

Royal DecreeIssued under the Revenue CodeGoverning Revenue Exemption (No.655)B.E.2561 (2018)

Royal DecreeIssued under the Revenue CodeGoverning Revenue Exemption (No.656)B.E.2561 (2018)

Royal Decree Issued under the Revenue Code Governing Revenue Exemption (No.657) B.E.2561 (2018)

Royal DecreeIssued under the Revenue CodeGoverning Revenue Exemption (No.658)B.E.2561 (2018)

Royal DecreeIssued under the Revenue CodeGoverning Revenue Exemption (No.659)B.E.2561 (2018)

Ministerial Regulation Governing Determination and Application of Customs Price B.E.2560 (2017)

Ruling No.Gorkhor 0702/2670     Date    2 April 2018

Corporate income tax (CIT) in the case of income tax exemption pursuant to Royal Decree(No. 604) B.E. 2559 (2016)

Ruling No.Gorkhor 0702/2672     Date    2 April 2018

Value added tax (VAT) in the case of VAT penalty imposition pursuant to Department Instruction No. Tor.Paw.120/2545

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