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מחירי העברה: סינגפור- ינואר 2016

13 ינואר 2016

IRAS updates transfer pricing guidelines

Transfer On 4 January 2016, the Inland Revenue Authority of Singapore (IRAS) released third edition of transfer pricing (TP) guidelines which effectively replaces the second edition issued on 6 January 2015 (refer here for the prior analysis). The key amendments are centred around the Advance Pricing Arrangement (APA) process and application of cost plus method.

These amendments are summarized as follows:

Enhancements to guidance on the APA process

  • Constitution of roll-back year for APA programme: The IRAS has now clarified that the year of application cannot be included as a part of the APA covered period. However, on a specific approval granted by the IRAS the application year can be covered as a roll-back year. Resultantly, taxpayers will need to plan their roll-back years for the APA program in order to avoid any of them being eliminated as only two years are eligible for a roll-back.
  • Timeline for inclination to accept APA request: It has been clarified that the IRAS will indicate if it is inclined to accept the APA request at least four months before the first day of the APA covered period. Taxpayers should then submit their application to IRAS within three months of IRAS giving its indication. Contrasting these changes with the 2015 TP guidelines (which allowed taxpayers to submit their application at least six months before the first day of APA covered period) means that the taxpayer will have to wait for a couple of months more after the pre-filing meeting for IRAS’ inclination to accept or reject the APA request. It effectively results in more lead time for IRAS to evaluate the request from the date of first pre-filing meeting and to request additional information/ documents, if necessary, and taxpayers should therefore be prepared to respond to these requests of additional prefiling meetings/information or documents.
  • Timelines for bilateral and multilateral APAs: For bilateral and multilateral APAs, where the filing deadline imposed by a foreign competent authority is earlier than that of IRAS, taxpayers should observe the earlier filing deadline. This, however, will not affect IRAS’ consideration and observation of the revised timeline noted below under its APA process.
  • IRAS’ power to audit taxpayers under certain circumstances: It has been clarified succinctly in this third edition that IRAS is not precluded from auditing taxpayers if there is non-compliance with the Singapore tax law. Though, IRAS always had the ability to audit taxpayers, this positionis now clarified through the addition of subject sentence. However, the guidelines have stopped short of clarifying or providing instances that would trigger an audit and clarity on the same is awaited as it might result in double taxation for the taxpayer.


The timeline process of APA program is explained below on the presumption that the first day of the APA covered period is 1 January 2017:


Additional guidance on the application of costplus method (CPM)

  • Clarification on cost base for CPM: The IRAS clarified that in application of CPM, the direct and indirect costs used to compute the cost base are limited to the costs of the supplier’s functions performed, assets used and risks assumed in provision of the goods and services.The methods of determining the cost base should be consistent over time.


  • Adherence to Singapore Financial Reporting Standards: Further, if the supplier of the goods and services is the tested party and is a taxpayer in Singapore, the cost base should be determined according to the Singapore Financial Reporting Standards. In addition, certain costs may need to be adjusted and should form part of the cost base of the tested party (for applying the arm’s length mark-up percentage) even though its related party has borne those costs for the benefit of tested party and such costs have not been allocated to and reflected in the accounts of the tested party. An example has been included in the guidelines explaining the application of CPM to suppliers who are located in Singapore. Consequentially, the above proposition should squarely apply to the application of transactional net margin method though not clarified in this third edition. However, we believe that it may pose a practical challenge for taxpayers to identify such costs and maintain supporting documentation to demonstrate their arm’s length pricing. 

Enhanced guidance on related party loans

  • The IRAS has now clarified that, similar to applying the arm’s length principle on loans extended by taxpayers to a related party, the arm’s length principle should also be applied on loans received by taxpayers from a related party, or taxpayers who become a debtor of a related party.

Our comments

The amended guidelines will take immediate effect. Further, the changes to the Singapore TP guidelines are mainly targeted at taxpayers seeking to enter into the APA programme and to that extent the impact is less significant with there being no other changes. With this, 2015 TP guidelines which mandated maintenance of contemporaneous TP documentation will continue to play a significant role in transfer pricing landscape for Singapore taxpayers. It is also interesting to note that though IRAS generally takes guidance from the Organisation for Economic Co-operation and Development (OECD) transfer pricing guidelines, the IRAS has not proposed any specific changes to the TP regulations to incorporate the guidance provided by the OECD on 5 October 2015 under the final Base Erosion and Profit Shifting (BEPS) action plan 13, which calls for a review of exiting TP documentation rules and development of a template of country-by-country reporting of income, taxes and economic activity for ta administration. Taxpayers can expect future changes in the TP guidelines to be more in line with BEPS initiatives.

Further, there is no change in threshold requirements and taxpayers that exceed the threshold must critically assess their level of TP compliance and seek to prepare and maintain contemporaneous TP documentation by the tax return filing deadline as mandated by the IRAS in the 2015 TP guidelines. In addition, there are no changes in the list of routine support services which was drawn up in 2009. 

Therefore, if a taxpayer is of the view that the services it provides constitute routine support services, it may request for a confirmation from IRAS. Considering the increased focus of not only IRAS but tax authorities globally on the subject of transfer pricing, it will be imperative for taxpayers to demonstrate through supporting TP documentation that their inter-company transactions are at indeed at arm’s length. The documentation will serve as a first line defence in case of any queries and also from subjecting the taxpayer to double taxation.

Please contact us if you are interested in analysing the implications of these new guidelines on your business and on obtaining more information how we can support you in preparing TP documentation in Singapore.

For further details please contact:

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+65 6829 9629

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+65 6828 9145

[email protected]
+65 6828 9180

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+65 6829 9621