Singapore Updates Transfer Pricing Guidance

Singapore Updates Transfer Pricing Guidance

The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also  regularly writes news stories about transfer pricing and international tax law. Alex is reachable on email ( and by phone (+447808558597). 

On February 23, 2018, the Inland Revenue Authority of Singapore (IRAS) published key updates and amendments to the country’s transfer pricing guidelines, including new transfer pricing documentation requirements.

Transfer pricing documentation

With effect from assessment year 2019, taxpayers who meet either of the following conditions must prepare transfer pricing documentation for their related-party transactions undertaken in a financial year (basis period):

  • Gross revenue derived from their trade or business is more than SGD10m for that basis period; or
  • Transfer pricing documentation is required to be prepared for the previous basis period.

According to the IRAS, transfer pricing documentation must be prepared no later than the filing due date of the tax return and must be submitted within 30 days upon request by the tax authority. Transfer pricing documentation must be retained for a period of at least five years from the end of the basis period in which the transaction took place.

Transfer pricing documentation should be prepared on a contemporaneous basis, the guidance states.

A taxpayer shall be liable on conviction to a fine not exceeding SGD10,000 for:

  • Not preparing transfer pricing documentation by the time for the making of the tax return;
  • Not preparing transfer pricing documentation with the details and in the form and content as prescribed under law;
  • Not retaining the transfer pricing documentation for a period of at least five years from the end of the basis period in which the transaction took place;
  • Not submitting the transfer pricing documentation within 30 days from the date of request; or
  • For providing any documentation that the taxpayer knows to be false or misleading.

The guidance only discusses transfer pricing documentation requirements at “Group” and “Entity” levels given that the requirement for country-by-country reporting is separately provided under Part 20B of the Income Tax Act.

Permanent establishment

The permanent establishment (PE) in Singapore (and other PEs outside Singapore) of a non-resident is treated as separate and distinct person for the purpose of attributing profits to the permanent PE. They are considered related parties and accordingly the arm’s length principle applies to them when attributing profits to the PE in Singapore, the guidance notes.

It is noted that the profits attributable to the PE in Singapore are the profits that the PE would have derived if it were a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions.

Arm’s length adjustment

The IRAS will make transfer pricing adjustment when taxpayers do not comply with the arm’s length principle and have understated their profits. The IRAS would make adjustment on the income that is accrued in or is derived from Singapore, or is received in Singapore from outside Singapore. Once an adjustment is made, the amount of income increased is treated as accruing in or derived from Singapore or received in Singapore from outside Singapore. When an adjustment involves reducing a loss, the amount of loss reduced is treated as not having been incurred, the guidance states.

According to the guidance, the IRAS would disregard an actual related-party transaction or replace it with an alternative transaction only in exceptional circumstances where:

  • The arrangements made in relation to the transaction lack the commercial rationality that would be agreed between independent parties under comparable circumstances; and
  • The arrangements prevent determination of a price that would be acceptable to both of the parties taking into account their respective perspectives and the options realistically available to them at the time of entering into the transaction.

Other guidance

Guidance has also been provided on the application of arm’s length principle for re-financing. A taxpayer may obtain a loan from a related party to repay an existing loan or extend the tenure of an existing related-party loan. The taxpayer is required to establish the arm’s length terms and interest rate for the new loan, the guidance notes.

Guidance has also been updated on comparability analysis and transactional profit split method.

The author is with TP News