IRAS releases second edition of transfer pricing guidelines

On 6 January 2015, the Inland Revenue Authority of Singapore (“IRAS”) released the Second Edition of its Transfer Pricing (“TP”) Guidelines, which consolidates previous TP circulars and guidance issued by IRAS.

The revised TP Guidelines is relevant if your business has transactions with related parties. It seeks to ensure prices charged for transactions between related parties are at arm’s length, i.e. market price. Related parties commonly refer to a company that owns or controls another company, or companies controlled by the same persons or having the same shareholders, directly or indirectly.

Contemporaneous TP documentation

The main change in this second edition is the requirement that businesses prepare contemporaneous TP documentation to substantiate that their related party transactions are at arm’s length. Contemporaneous TP documentation is defined as “documentation and information that taxpayers have relied upon to determine the transfer price prior to or at the time of undertaking the transactions”.

The requirement is considered part of the record-keeping requirement for tax purposes. The TP documentation is to be organised at Group level and Entity level, although there is no country-by-country reporting requirement as suggested under the OECD guidelines.

When is contemporaneous TP documentation required?

IRAS would accept TP documentation prepared at any time no later than the time of completing and filing the tax returns for the financial year in which the transactions took place, though there is no requirement to submit TP documentation with the tax returns. That said, upon request from IRAS, taxpayers have 30 days to submit the required TP documentation.

Taxpayers are to update their TP documentation at least once every 3 years or earlier, when there are material changes to the operating conditions that impact their functional analysis or TP analysis. Taxpayers should also test their related party transactions against the arm’s length results on a yearly basis.

Penalties for not preparing contemporaneous TP documentation

Penalties may be imposed under the laws concerning inadequate record keeping and an upward adjustment may be made if IRAS concludes that the taxpayer has understated profits through improper transfer pricing.

Additionally, IRAS may not support the taxpayer in Mutual Agreement Procedure discussions if the taxpayer concerned has suffered double taxation arising from any TP audit by IRAS or foreign tax authorities. IRAS may not also accept the application of Advanced Pricing Agreement (“APA”) or taxpayer-initiated TP adjustments in the absence of proper TP documentation.


IRAS does not expect taxpayers to prepare TP documentation under the following situations:
a. Where the taxpayer transacts with a related party in Singapore and such local transactions (excluding related party loans) are subject to the same Singapore tax rates for both parties
b. Where a related domestic loan is provided between the taxpayer and a related party in Singapore and the lender is not in the business of borrowing and lending
c. Where the taxpayer applies the 5% cost mark-up for certain routine services in relation to the related party transactions
d. Where the related party transactions are covered under an APA. However, an annual compliance report is still required
e. Where the value or amount of the related party transactions (excluding the value or amount in sub-paragraph (a) to (d)) disclosed in the current year’s financial accounts does not exceed the threshold as shown in the table below:


Category of Related Party Transactions Threshold (S$) Per Financial Year 
Purchase of goods from all related parties 15 million
Sale of goods to all related parties 15 million
Loans owed to all related parties 15 million
Loans owed by all related parties 15 million
All other categories of related party transactions
Examples: Service income, Service payment, Royalty income, Royalty expense, Rental income, Rental expense

For the purpose of determining if the threshold is met, aggregation should be done for each category of related party transactions. For example, all service income received from related parties is to be aggregated.




1 million per category of transactions



The TP Guidelines are effective immediately, implying that the first year covered would be the financial year 2014.

Do I need to prepare TP documentation?

If you are uncertain of the new requirement's impact on your business, please contact our tax specialists below:

Elis Tan, Director, Transfer Pricing
T +65 6594 7819

Cindy Lim, International Tax Partner
T +65 6594 7852

Koh Puay Hoon, International Tax Partner
T +65 6594 7820

William Chua, International Tax Partner
T +65 6594 7860