Singapore Updates Guidance On Transfer Pricing Regime
The Inland Revenue Authority of Singapore (IRAS) on February 23, 2018, released the fifth edition of its Transfer Pricing Guidelines for income tax.
During a public consultation held in June 2017, stakeholders asked the Ministry of Finance to provide more clarity and guidance on transfer pricing documentation (TPD) requirements, specifically regarding the circumstances under which a person would be exempt from preparing TPD and regarding the application of the Comptroller’s power to enforce the arm’s length principle – for example, the circumstances in which the IRAS would re-characterize a related-party transaction.
The updated guidelines further explain how IRAS applies the arm’s length principle, in particular for related-party supplies of services and loans, and redrafts the earlier guidance on transfer pricing documentation obligations.
IRAS listed the following specific amendments:
- Sections one, two, and three of the guidance have been simplified.
- The word “treaty” used throughout the e-Tax guide has been replaced with “DTA” to be consistent with IRAS e-Tax Guide on Avoidance of Double Taxation Agreements.
- Guidance on related parties for permanent establishment in Singapore has been added in paragraphs 4.3 and 5.8.
- Enhanced guidance is provided on comparability analysis, in paragraphs 5.15 to 5.25, 5.31 to 5.34, 5.40, and 5.51.
- Enhanced guidance is provided on the transactional profit split method, in paragraphs 5.80 and 5.81.
- New paragraphs 5.117 to 5.124 have been added, on arm’s length adjustment by IRAS.
- Section six has been rewritten entirely, on TP documentation requirements.
- Paragraphs 8.23, 8.35, and 8.36 have been amended to be consistent with IRAS’s e-Tax Guide on Avoidance of Double Taxation Agreements.
- Added a new paragraph 13.27, on the application of the arm’s length principle for re-financing.
- Added a new section 15 on surcharges and penalties.
- Item eight has been amended and an item 9 has been added in Annex B2.
- The types of routine support services in Annex C has been amended to be consistent with First Schedule of the TP Documentation Rules.
