Customer data being mispublished, employee computers being lost, databases being attacked, security incidents at cloud service providers... The statutory 72-hour countdown may have begun when a business discovers that a relevant incident may involve personal data.
阅读全文: Golden 72 hours after a data breach: How should companies in Thailand respond? | DRKI
![The reason she asked this question is because the IBC company that she taken care of was audited by the Revenue Department. The officer assessed additional income for the company, stating that IBC services must always include a mark-up of no less than 5%. The officer justified this by referring to the OECD Transfer Pricing Guidelines. So, I went back to review the 2022 revised version of the OECD Guidelines and found the following: 1. First, let’s clarify that the OECD Guidelines are not law, and Thailand is not a member of the OECD (although it participates in the BEPS framework for preventing base erosion and profit shifting by multinational enterprises). Therefore, we should view these guidelines as merely “generally accepted principles.” 2. The OECD guidelines that the officer referred to is likely found in Chapter VII, concerning Intra-group services, specifically section D.2, which discusses a simplified transfer pricing method for low value-adding services. Examples of such services include accounting and auditing, general administration, human resources, IT services, etc. (see sections 7.45–7.49 for details). 3. The purpose of the recommendations in section D.2 is to “make life easier,” and can be summarized into three points: (a) Reduce the burden of proving the benefit received and determining transfer pricing under the Arm’s Length Principle. (b) Provide assurance to multinational enterprise groups that the Revenue Department will accept transfer prices determined under these conditions. (c) Offer guidance to the Revenue Department regarding transfer pricing documentation that [taxpayers] should prepare to facilitate efficient tax audits. 4. At this point, I’d like to present the exact wording cited by the officer, along with its translation, for consideration. “7.61. In determining the arm’s length charge for low value-adding intra-group services, the MNE provider of services shall apply a profit mark-up to all costs in the pool with the exception of any pass-through costs as determined under paragraphs 2.99 and 7.34. The same mark-up shall be utilized for all low value-adding services irrespective of the categories of services. The mark-up shall be equal to 5% of the relevant cost as determined in Section D.2.2. The mark-up under the simplified approach does not need to be justified by a benchmarking study.” That is, paragraph 7.61 of the OECD Guidelines suggests that if an MNE applies a 5% mark-up to the total cost of low value-adding services, the MNE is not required to conduct a Benchmarking Study. We can observe that paragraph D.2.2 of the OECD Guidelines does not mandate that an MNE must set transfer pricing to ensure a profit margin of not less than 5% from providing low value-adding services. Likewise, Thai law does not prescribe such a requirement. However, if a tax officer refers to the OECD Guidelines during a tax audit, they may inform the IBC company that: “If the company sets transfer prices with a 5% mark-up, it may be exempted from conducting a Benchmarking Study. However, when the company’s profit margin is below 5%, the Officer may ask the company to submit a Benchmarking Study to demonstrate that the transfer pricing applied complies with the Arm’s Length Principle and is consistent with Section 71 bis.”](/images/DRKI/Services/CN/Insight-CN/IBC.jpg)
Today, I’d like to digress from the topic of transfer pricing methods and touch upon a question from an accountant. I was asked about the appropriate profit margin for a company operating as an International Business Center (IBC), which provides management, technical, and support services to related companies under Section 71 bis, paragraph 2. Not beating around the bush, the answer is that a benchmarking analysis must be conducted using one of the five pricing methods recognized by the Director-General’s Notification No. 400.
阅读全文: Question from an Accountant – Does an IBC Company Need to Have a 5% Profit Margin? | DRKI
The selection of a transfer pricing method must comply with the Director-General’s Notification No. 400, Clause 6, which outlines four simple criteria for choosing a method. Although the Notification does not provide detailed explanations, I’d like to elaborate on these criteria to help us better understand and apply them appropriately.
The Transfer Pricing Methodology, as outlined in Clause 5 of the Director-General’s Notification No. 400, refers to the approach used to consider whether the compensation set by a company for controlled transactions (i.e., transactions between related parties as defined under Section 71 bis, paragraph 2 of the Revenue Code) is consistent with the compensation that would be agreed upon by independent parties in comparable transactions.
Once upon a time, over 20 years ago, a tax officer informed Company J, which manufactures electronic components for export to its parent company in Japan, that “companies in the electronic components manufacturing industry have an average operating profit margin of 15%.” Consequently, the officer reassessed Company J’s profit margin from 3% to 15% and issued a notice of additional tax payment, including penalties and surcharges. If you were the managing director of Company J, how would you explain this?
第 1 页 共 4 页
