Singapore: Where Transfer Pricing has become a transparent area of focus


Singapore has committed to the global implementation of the BEPS Project proposed by the OECD. Particularly, a lot of attention has been given to Actions 8-10, pertaining Transfer Pricing (TP). More precisely, the cornerstone for TP law in Singapore comprises the Income Tax Act. The Income Tax Rules of 2018 and the 5th Edition of the TP Guidelines give guidance for practical application.

The Inland Revenue Authority of Singapore (IRAS) seems to be giving a lot of importance to the TP landscape, as it estimates that it will crucially augment its revenues. To that end, the last few years there is a legislative activity without precedent. Just for the sake of a mere example, substance over form approach has even been a part of a codification, that way introducing expressly the possibility for IRAS to re-characterize the transaction in certain cases.


As explained in detail in our previous articles, TP law is basically applied upon transactions between related parties. The definition of related parties is provided under section 13(16) of the Singapore Income Tax Act and reads as follows:

[R]elated party, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person, directly or indirectly, are under the control of a common person“.

There are some thresholds to be met, so as for the TP law to be applicable in a Singaporean taxpayer. In particular, a taxpayer does not fall into the scope of the TP rules if

(a) the gross revenue does not exceed 10 SGD (Singapore Dollars) for the current basis period and

(b) was not subject to any TP documentation for the last two fiscal years.

Otherwise, a taxpayer should wait for three consecutive years (continuity principle) with gross revenue less than 10 SGD, so as to stop needing to prepare TP documentation (TPD).

Once an entity is subject to the TP law, the next step is to make certain that it complies with the relevant rules.


The Singaporean TP legal framework adopts the following documentation structure:


Country-by-Country Report (CbCR) where MNEs report annually (for each tax jurisdiction in which they do business) some crucial information. This information refers to their global allocation of profit, taxes paid, borrowings, employees and indicators of economic activity by country. Broadly, the CbCR is required for an MNE group if: (a) The MNE group is a Singaporean MNE group, (b) The consolidated group revenue in the preceding financial year was at least 125.000 SGD ; and (c) The MNE group has subsidiaries or operations in at least one foreign jurisdiction.

The ultimate parent – reporting entity shall file a CbCR to the Inland Revenue Authority of Singapore (IRAS). The deadline for the submission is within 12 months from the end of the fiscal year.

2. Related Party Transactions (RPT) FORM

RPT Form contains information about the values of the following categories:

  • Sales and purchases of goods
  • Services income and expense
  • Royalty and license fee income and expense
  • Interest income and expense
  • Other income and expense
  • Year-end balances of loans and non-trade amounts

In addition, if the company has any cross-border related party sales or purchases of goods and services, it shall list the top 5 foreign associated parties that it transacts with (by value of sales or purchases respectively) and provide the details of the RPT, including entity names, countries, relationship as well as amounts transacted.

3. other documentation requirements

According to the Income Tax Rules 2018, taxpayers have to file another document which reveals significant information. This information includes a description of the transaction, the applicable entity, its group and the completion day of the TP file.

Singapore has not formally adopted the OECD Master/Local File requirements. However, the information required under the 2018 Rules is largely similar to Master/Local File contents. This means that they focus on describing businesses relevant to the Singaporean taxpayer.

The preparation of the TPD has to take place no later than the filing deadline of the income tax return. However, the company shall deliver the TPD to the IRAS within 30 days upon request. Lastly, the retention of the TPD is mandatory for five years.


Failure to prepare the required TPD constitutes an offence. Therefore, the taxpayer is liable to a penalty of up to 10.000 SGD per incident. The Tax Inspector may impose such a penalty, if a taxpayer does not:

  • Prepare or maintain TPD under the requirements of Rules 2018;
  • Draft TPD by the time of the filing of the tax return;
  • Retain TPD for a period of 5 years;
  • Submit TPD within 30 days since the request by the IRAS;
  • Provide accurate and correct documentation or information (by intention).

The date of completing the TPD must be clearly indicated. In addition to the aforementioned penalties, IRAS has also introduced a TP surcharge of 5% on the adjustment.

What is more & How we can help

Unilateral, bilateral as well as multilateral APAs, are available in Singapore. Against this backdrop, we can help you prepare and apply for APAs, and advise you before, during and after negotiation and agreement with the tax authorities. For example, we can help you select appropriate TP methodologies and critical assumptions, prepare supporting documentation for the APA application, negotiate with the tax authorities, and prepare annual reports during the APA’s implementation period.

In broad terms, complying with TP regulation in Singapore could emerge with the preparation of a preliminary study, to assess the intragroup margins in the provision of products or services. To this extent, a competent TP analyst may use benchmarking data from online databases (e.g. Thompson Reuters, Amadeus e.t.c.) and other resources, to facilitate managerial decisions around the margins (the revised Guidelines state that “taxpayers are to review and refresh their TP documentation annually”). When taxpayers are unable to find sufficient reliable local comparables, they may expand their search to international ones.

Management fees, interest, technical consulting, royalties, products, are globally very possible to trigger tax inspections and adjustments. Thus, a full TP study – especially on these matters- is a must.


Tax authorities globally have committed to share more information, that way gaining access to more data (e.g. via CbCR, CRS /disclosure agreements). The said international cooperation in the tax field, is conducive to a closer scrutiny on TP tax audits as tax authorities are becoming much more efficient and proactive at sharing information and conducting inspections. Moreover, given the close relation between money laundering activities and TP mechanisms, AML (anti-money laundering) initiation has further intensified the said audits. Effective audit and inspection systems have already been established in order to better detect suspicious money-laundering transactions as well as prevent money-laundering crimes (MLCs).

All these boil down to the conclusion that – as is the case with offshore jurisdictions – doing business with relation to such a country, comes with a considerable number of advantages. On the other hand, an extra effort is necessary so as to assure compliance with the rules, mitigate potential risks, that way optimizing the results of an activity. Thus, TP compliance constitutes a realm which necessitates full attention by the part of a CEO, CFOs or a business owner, not to also mention that a TP file makes sense for corporate governance.

After all, aside from the legislative requirements and penalties involved, robust TPD is key for articulating a taxpayer’s view on where value is created. Industry experts deem that tax audits regarding TP law will be in the increase in 2019 and 2020. Against this backdrop, early advice and TP planning are the most effective approach for timely problem recognition and resolution.

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