Things That Might Trigger a Transfer Pricing Investigation

The revenue department in Thailand (RD) can investigate at any time when they are researching your transfer pricing (TP) practices. The fact is, TP practices can send red flags to Thailand’s RD and make them want to investigate them to make sure that nothing you’re doing is illegal or unethical. Naturally, if you’re not doing anything wrong, you don’t have anything to worry about, but this doesn’t mean that being investigated won’t wrack your nerves. Fortunately, if you know what the RD looks for during these investigations, it can be a little easier on you.

What Do They Look for in a TP Investigation?

Numerous factors can trigger a red flag to the revenue department when they’re looking at your TP practices. These include, but are not limited to, the following:

  • Any request for a refund. This is applicable even if the related party transaction is minimal or minor.
  • A price adjustment during the year, or at year end, to revise profit.
  • Management service fee payments made to any affiliated entities of any type.
  • A fluctuating profit and loss (P&L). This can include going from a profit to a loss after the CIT holiday period has expired under the BOI promoted project.
  • Having a long-running loss for many years at a time.
  • Any significant transactions between your affiliated entities. This can include providing various services and trading goods. It can also include any royalty payments.

As you can see, there are numerous signs that might alert TP investigators that something might be wrong or need their attention. The RD has special teams that especially pay attention to international transactions, and these teams are always on the lookout for red flags that may be considered as something they need to take a closer look at.

What Can You Do?

The bottom line is, it doesn’t have to be difficult or worrisome thinking about the revenue department and their TP investigations. When you’re working with a company that specializes in helping businesses conduct business properly by advising them on all types of financial issues, it’s a lot easier to know that you’re doing the right thing. These companies ascertain your situation and give you advice on what you can do to improve your processes and practices so they are always legally acceptable and following the rules like they should. In the end, this is usually your best protection against a TP investigation of your own business.