Bangkok--18 Oct--PwC Thailand
Taxpayers must gear up as tax authorities worldwide focus on cross border transactions and digital business, PwC Thailand says.
"Stricter tax regulations and the introduction of new information disclosure protocols are among the major challenges facing Thai businesses today," said Somboon Weerawutiwong, Lead Tax Partner at PwC Tax & Legal Consultants Ltd.
While Thailand's tax authority is closely focussing on business restructuring, particularly the use of tax havens, it's now paying increased attention to timely information disclosure, digital transactions and tax audits.
Speaking at the 18th annual conference Maximise Shareholder Value through Effective Tax Planning 2017 – Equipping yourself for global change, Somboon said that, this year, Thailand has seen an increase in 'summons audits' – the Revenue Department's most stringent tax collection method.
The increase in summons audits is aimed at reducing outstanding cases as well as dealing with issues that arise from business operation visits.
To reduce the chance of receiving a summons audit, taxpayers must conduct regular tax health checks, Somboon said. These allow companies to identify and resolve issues before the tax authority investigates them, and can reduce tax penalty exposures.
"It's imperative that taxpayers take into account commercial purposes and business substance to achieve transparency in their tax planning," Somboon said.
Multinationals are increasingly restructuring businesses and improving the 'effective tax rate'. This prompted the G20 and the Organisation for Economic Cooperation and Development (OECD) to introduce base erosion and profit shifting (BEPS) measures and to achieve and promote cooperation among countries in which multinationals operate.
Amongst the proposed measures, there is a three-tiered approach to force disclosure of global transfer pricing information and methods. It requires 1) a master file of transfer pricing standards and information for all of a multinational group's members, 2) separate local files of material transactions for local taxpayers, and 3) a report on the global allocation of the multinational group's income and taxes and the economic activity locations in the group.
Thailand and its ASEAN counterparts are adopting some of the G20 and OECD measures to promote transparency in the business environment, Somboon said. To do this, government authorities and international organisations must collaborate to lay down tax planning measures to lower the tax burden.
Thai businesses operating in countries that enforce this approach must be prepared to submit in a timely manner, the necessary information to the tax authorities of those countries.
In Thailand, the Revenue Department, Somboon said, is currently establishing new transfer pricing regulations on disclosure of intercompany transactions.
The digital economy forces changes in tax regimes
Governments around the world are working to update regulations to address tax collection challenges in the digital economy.
According to Somboon, "The rapid spread of digitalisation has led to an increasing amount of business transactions, with trading platforms changing from conventional store purchases to online shopping on vendors' websites and mobile applications.
"With internet transactions becoming more pervasive and achieving significant volumes, authorities across the world are focusing on new methods of efficiently recording the transactions and collecting more tax."
Along with the rest of the world, Thailand is developing new electronic tax collection systems involving e-payments, e-tax filing, and e-documentation to develop in line with digital transaction growth and establish a more efficient tax collection system.
Somboon also spoke of the new financial technology, the so-called FinTech, which was developed and introduced to boost the effectiveness and transparency of the country's financial system, following the government's announcement of policies on the digital economy.
As the business landscape evolves, taxpayers should brace themselves for stricter tax laws, and be equipped to deal with the coming changes, Somboon said.
"The Revenue Department is likely to institute more vigorous audits. Good preparation and planning will go a long way to enable taxpayers to deal with this," he added.