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Global transfer pricing guide

Transfer pricing - Singapore

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Introduction to transfer pricing in Singapore
Transfer pricing rules
  • The Inland Revenue Authority of Singapore (IRAS) released the first Transfer Pricing (TP) guidelines in 2006 and its 6th edition Transfer Pricing Guidelines (TPG) on 10 August 2021. The revised TPG provides guidance on the implementation of the transfer pricing (TP) related amendments made to the Income Tax Act (ITA) on 26 October 2017.
  • All related party transactions (RPT) should be conducted at arm’s length, i.e. as if they were unrelated third parties.
  • Effective from Year of Assessment (YA) 2019, Singapore formally introduced TP rules requiring taxpayers to prepare contemporaneous TP documentation (TPD). In other words, TPD is mandatory in Singapore unless taxpayers meet certain TPD exemption conditions.
  • The TPD needs to analyse whether related party transactions are being conducted at arm’s length and can serve as the first line of defense in case of query. Taxpayers should have their TPD ready when filing their tax returns and submit it to the IRAS within 30 days, but only upon request.
  • The arm’s length principle applies to all taxpayers in Singapore that have entered into a controlled transaction with their affiliates.
  • For larger groups (revenues in excess of S$1,125 million), Singapore has implemented CbCR (Country by Country Reporting).
OECD guidance
  • Singapore provides guidance on determining the arm’s length price (i.e. transfer pricing methods, comparability adjustments, etc.) in the Singapore TPG.
  • The Guidelines also mentioned that Singapore takes guidance from the OECD Transfer Pricing Guidelines, including the guidance in the Actions 8-10: 2015 Final Reports on Aligning Transfer Pricing Outcomes with Value Creation.
Transfer pricing methods
  • There are five internationally accepted methods for evaluating a taxpayer’s inter-company pricing arrangement, namely the comparable uncontrolled price method, resale price method, cost plus method, transactional net margin method, and transactional profit split method.
  • The Singapore TPG requires that the most appropriate pricing method should be selected on a transaction-by-transaction basis, providing the most reliable measure of an arm’s length result in each case. Though the traditional transaction methods provide for a more direct comparison with independent party transactions, taxpayers can choose the most appropriate transfer pricing method depending on the facts and circumstances of each case.
  • Taxpayers may also choose other more appropriate methods or use a combination of various methods to comply with the arm’s length principle. Whichever method the taxpayer chooses, TPD should be maintained to demonstrate that its transfer prices are established in accordance with the arm’s length principle.
  • Singapore has a self-assessment regime, where the onus is on the taxpayer to ensure that transfer pricing regulations are adhered to.
  • Singapore taxpayers are required to file a separate Form for reporting related party transactions (RPT Form) in case the value of the aggregate of their related party transactions for a year exceeds S$ 15 million.
Transfer pricing documentation
Preparation of transfer pricing documentation
  • The obligation of preparing TPD applies to taxpayers who meet either of the following conditions:
    • Gross revenue derived from their trade or business is more than S$ 10 million for that basis period; or
    • TPD was required to be prepared for the previous basis period.
  • TPD guidance and preparation is found in section 6 of the TPG. TPD must be prepared on a contemporaneous basis. Contemporaneous TPD refers to documentation and information that taxpayers have relied upon to determine the transfer price prior to or at the time of undertaking the transactions. IRAS will also accept TPD as contemporaneous when it has been prepared not later than the filing due date of the tax return for the financial year in which the transactions took place.
  • The TPD is to contain information as regards the MNC Group and information about the taxpayer. The contents of the TPD are largely akin to requirements recommended by the OECD for maintenance of Local File and Master File.
  • The date of completing the TPD must be indicated on the TPD. The TPD must be in English or, if not in English, translated into English at the request of IRAS.
  • IRAS does not require taxpayers to submit TPD when they file their tax returns. Taxpayers must keep their TPD and submit it to IRAS within 30 days upon request.
  • Taxpayers must retain TPD for at least five years from the end of the basis period in which the transaction took place. IRAS advises taxpayers to retain TP documentation for a longer period if they are involved in an audit or a MAP.
  • Taxpayers who are not required to prepare TPD under section 34F of the ITA are encouraged to prepare such documentation.
Master and local file
  • In Singapore, taxpayers are required to prepare local TPD as well as the CbC Report. There is no separate requirement to maintain a Master File as portions of information typically required to be maintained as a part of the Master file are subsumed within the local TPD contents.
  • CbCR form
    • The ultimate parent entity of the Singapore MNE group will be required to file a CbC Report for all entities in the group if it meets all of the following conditions:
      • The ultimate parent entity of the MNE group is tax resident in Singapore;
      • Consolidated group revenue for the MNE group in the preceding financial year is at least S$1,125 million; and
      • The MNE group has subsidiaries or operations in at least one foreign jurisdiction.
    • CbC Report should be submitted to IRAS within 12 months from the end of the ultimate parent entity's financial year.
Some risk factors for challenge
  • Transactions with cross-border related parties that are of large value relative to the other transactions of the taxpayer;
  • Transactions with related parties subject to a more favourable tax treatment;
  • Recurring losses or large swings in operating results which may be unusual given the functions and assets of the taxpayer and the risks it assumed;
  • Operating results that are not in line with businesses in comparable circumstances;
  • Use of intellectual property, proprietary knowledge or other intangibles in the business;
  • Transactions involving Research and Development or marketing activities which could lead to development or enhancement of intangibles; and
  • Indications (examples, through engagement with tax authorities, country’s audit focus, etc.) that the transactions are likely to be subject to transfer pricing audit by tax authorities.
  • The penalty and surcharge are effective from the YA 2019 (ie financial year 2018)
  • Taxpayers which do not prepare proper TPD shall be liable to a fine not exceeding SGD 10,000.
  • Where transfer pricing adjustment is made by the IRAS, the taxpayer is subject to a surcharge of 5% of the amount of adjustment, regardless of whether there is a tax payable on the adjustments.
Economic analysis and how to demonstrate an arm’s length result
  • IRAS does not have a preference for any particular commercial database as long as it provides a reliable source of information that assists taxpayers in performing comparability analysis. Whichever database the taxpayer chooses, TPD should be maintained to demonstrate the results of its comparability analysis.
  • Taxpayers should only use comparables with publicly available information. Such information can be readily obtained from various sources and verified, making the analyses of these comparables more reliable compared to those based on privately held information.
  • Between a company that is listed on a stock exchange and one that is not listed, IRAS prefers the former as a comparable because there is generally more information available in the public domain compared to the latter.
  • As far as possible, taxpayers should use local comparables in their comparability analysis. Generally, these comparables have a higher degree of comparability in terms of their market and economic circumstances compared to non-local comparables. When taxpayers are unable to find sufficiently reliable local comparables, they may expand their search to regional comparables.
Advance Pricing Agreements (APAs), dispute avoidance and resolution


  • An APA is a dispute prevention facility provided under the Mutual Agreement Procedure (MAP) Article in Singapore’s DTAs and domestic tax law. It is an arrangement between IRAS and the taxpayer or the relevant foreign competent authority to agree in advance on a set of criteria to ascertain the transfer pricing of their taxpayers’ related party transactions for a specific period of time. It provides taxpayers with certainty on their transfer pricing to avoid double taxation.
  • IRAS will generally accept an APA request to cover three to five future FYs (i.e. covered period). IRAS may consider taxpayers’ request to extend the APA to up to 2 FYs immediately prior to the covered period (i.e. roll-back years) for a bilateral or multilateral, but will not accept a similar request for a unilateral APA.
  • The Singapore IRAS largely prefers bi-lateral / multilateral APAs as against unilateral APAs
  • As the transfer pricing regulations are relatively recent in Singapore, we do not see a significant number of APAs on a regular basis.


  • MAP is a dispute resolution facility provided under the MAP Article in Singapore’s DTAs16. It is a facility through which IRAS and the relevant foreign competent authority resolve disputes regarding the application of the DTAs.
  • Similar to APAs, considering the relatively recent introduction of transfer pricing regulations within Singapore, we have not seen a significant volume of MAP cases initiated out of Singapore.
  • The acceptance of a MAP or APA application is at the discretion of the competent authorities. IRAS will consider taxpayers’ requests for a MAP or APA based on the merits of each case.
  • Taxpayers are exempt from preparing TPD for their related party transactions undertaken in a basis period if (i) their gross revenue is not more than S$ 10 million for that basis period; or (ii) their gross revenue is not more than S$ 10 million for that basis period and immediate two preceding basis periods and were required to prepare TPD for the two preceding basis period.
  • If taxpayers meet either of the two conditions listed below and are required to prepare TPD for their transactions undertaken with their related parties.
    • Gross revenue derived from their trade or business is more than S$ 10 million for that basis period; or
    • TPD was required to be prepared for the previous basis period.
  • Taxpayers are however exempt from preparing TPD for those transactions if their specified transaction qualifies one of the TPD exemption conditions as below.
  • Specified transactions qualifying for an exemption from TPD:
    • Related party domestic transaction subject to the same tax rate
    • Related party domestic loan where the lender is not in the business of borrowing and lending money
    • Related party loan not exceeding S$ 15 million on which indicative margin is applied
    • Routine support services on which a 5% cost mark-up is applied
    • Related party transaction covered by APA
    • Related party transaction not exceeding certain value:
Category of transactions Threshold
Purchase of goods by the taxpayer from a related party 15 million
Sale of goods by the taxpayer to a related party 15 million
Loan by the taxpayer to a related party (Principle amount) 15 million
Loan to the taxpayer to a related party (Principle amount) 15 million
Provision of service to the taxpayer by a related party 1 million
Provision of service by the taxpayer by a related party 1 million
Grant of right to use movable property 1 million
Receipt of right to use movable property 1 million
Lease of any property to the taxpayer 1 million
Lease of any property by the taxpayer 1 million
Grant of a guarantee 1 million
Receipt of a guarantee 1 million
Any other transaction 1 million
Related developments
Commodity marketing and trading activities
  • On 24 May 2019, the Inland Revenue Authority of Singapore (the IRAS) released the TP guidelines for commodity marketing and trading activities (e-Tax Guide), which provide guidance on how to analyze the economic value of commodity marketing and trading activities (commodity marketing/ trading activities) in Singapore.
  • The e-Tax Guide outlines the various factors that may affect the transfer pricing for these activities, discusses appropriate TP methods that may be applied and highlights the benefits and common roles of conducting commodity marketing/trading activities in Singapore.
Digital services tax
  • From 1 January 2020 onwards, overseas digital service providers with a yearly global turnover of more than S$ 1 million that sell more than S$ 100,000 worth of digital services to customers in Singapore in a 12-month period are required to register for GST and charge GST.
IRAS and taxpayer behaviour
  • In 2018, it was the first time Singapore has rewritten its TP provisions since it initially legislated the arm’s length principle under section 34D of the Act, marking a new era for TP enforcement and administration.
  • The seriousness of the government in enforcing the arm’s length principle in Singapore was also clearly signaled through the legislation of TPD requirements and the tenfold increase (from up to $1,000 to up to $10,000) in penalties and 5% surcharge.
  • It is expected that taxpayers increasingly consider their TP compliance requirements through putting in place robust tax and TP policies, appropriate TPD, and relevant supporting documentation.
  • With the background of operational disruption and the consequential impact on their financial performance due to COVID-19, Singapore companies engaging in cross-border trade will still need to justify their inter-company pricing arrangements and justify the arm’s length nature of their pricing policy in their transfer pricing documentation through these stressful periods.
  • It would be prudent for MNCs to review their policies and re-align their pricing arrangements, to the extent necessary, to consider the impact that such slowdown may have.
  • To minimize risks and get a fair sense of the appropriateness of pricing arrangements with affiliates, it would be imperative for companies to move from an entity-level analysis to a transaction-by-transaction analysis. At such times, adopting an aggregated / entity level analysis of multiple transactions could create significant transfer pricing risks for taxpayers, leading to transfer pricing adjustments and consequential penalties. This is because overall profitability may be impacted by several factors including fall in demand, inefficiencies in operations, significant bad debts, forex losses, etc., none of which have anything to do with faulty transfer pricing policies.
  • When engaging in TP analysis, necessary adjustments to account for the slowdown period should be made.
  • In cases where it is not possible to carry out adjustments, or adjustments do not reflect the true impact of a business slowdown, it is desirable to document, in detail, the factors that led to business losses/insufficient profits as well as, to the extent possible, a quantification of the potential impact on account of such factors.

For further information on transfer pricing in Singapore please contact:

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Tran My Hanh
M +65 9674 3368