Operational Transfer Pricing in Thailand: From Compliance to Strategic Execution
Operational Transfer Pricing in Thailand: From Compliance to Strategic Execution
As global tax scrutiny intensifies and regulatory frameworks become more sophisticated, multinational enterprises (MNEs) are evolving beyond traditional compliance-based transfer pricing (“TP”) approaches. In Thailand, this evolution is especially evident in the rising prominence of Operational Transfer Pricing (“OTP”) — a proactive and data-driven approach that ensures TP policies are closely aligned with actual business operations through real-time data integration and system connectivity.
What is Operational Transfer Pricing?
Operational Transfer Pricing (OTP) is the framework multinational enterprises (MNEs) use to allocate revenues and costs between associated enterprises (“AEs”) in a way that aligns with both strategic policies and day-to-day business operations.
Unlike traditional transfer pricing, which often happens as a year-end compliance exercise, OTP is embedded into a company’s financial and operational systems, allowing for real-time or periodic monitoring. This ensures:
- Consistency across accounting, finance, tax, and operational teams
- Compliance with the arm’s length principle under OECD guidelines
- Alignment with prices that independent parties would agree to in similar transactions
- Transaction-level accuracy: Ensure accurate pricing for transactions.
- Real-time profit monitoring: Regular test of margins with target ranges.
- Cross-functional accountability: Coordinated execution between finance and operation.
- Data-driven adjustments: Adjusting and decisions based on information.
Thailand’s Revenue Department has increased its focus on TP transparency, following the enactment of the Amendment Act on Revenue Code No. 47 (2018), along with secondary regulations on transfer pricing and alignment with OECD, Base erosion and profit shifting (“BEPS”) Action Plan- particularly Action 13 on documentation and country-by-country reporting.
Key developments driving OTP relevance include:
- Mandatory TP Documentation – Thai companies with annual revenue exceeding THB 200 million must prepare a local file each year.
- Intensified Audit Activity – Tax authorities are examining intra-group transactions more closely, with a sharper focus on substance, consistency, and profit allocation.
- Shift to a Digital Tax Environment – Increased use of data analytics, e-filing, and automatic information exchange raises the likelihood of detecting mismatches and triggering audits.