If taxpayers choose to apply the indicative margin, they will apply the indicative margin on the appropriate base reference rate selected for the related-party loan.
The Inland Revenue Authority of Singapore has set the indicative margin pertaining to related-party loans for 2021.
For 2021, the indicative margin which taxpayers can apply on each related-party loan not exceeding SGD 15 million is + 275 bps (2.75 percent).
The indicative margin is not mandatory. It gives taxpayers an alternative to performing detailed transfer pricing analysis in order to comply with the arm’s length principle for their related-party loans.
If taxpayers choose to apply the indicative margin, they will apply the indicative margin on the appropriate base reference rate selected for the related-party loan.
If taxpayers choose not to apply the indicative margin or if it is not applicable to them, they will have to apply an interest rate in line with the arm’s length principle and maintain contemporaneous transfer pricing documentation.