Singapore Updates Guidance On Transfer Pricing Regime

by Mary Swire, Tax-News.com, Hong Kong

28 February 2018

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.

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