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moreTransfer Pricing Updates
Published on March 24, 2023Our team of Transfer Pricing professionals are able to assist in reviewing and preparing contemporaneous documentation and/or global group transfer pricing policy.
To better understand how the TP requirements can impact your business, please do not hesitate to contact our team listed above or email us at [email protected].
On 2 October 2017, the Income Tax (Amendment) Bill 2017 (“ITB 2017”) was passed by the Parliament. The ITB 2017 includes specific transfer pricing (“TP”) related changes to strengthen Singapore’s TP regime, such as the introduction of a new Section 34F which imposes a mandatory requirement for contemporaneous and adequate TP documentation (“TPD”), and penalties for non-compliance from the basis year for the Year of Assessment (“YA 2019”).
On 22 February 2018, the Income Tax (Transfer Pricing Documentation) Rules 2018 (“TPD Rules”) was gazetted and IRAS issued the updated 5th edition of the Singapore Transfer Pricing Guidelines on the following day. On 10 August 2021, IRAS published the 6th edition of the Singapore Transfer Pricing Guidelines (“6th Ed TPG”).
The TPD Rules and the 6th Ed TPG set out in detail the workings of Singapore’s reinforced TP regime. Pertinent points include clarifications made to the arm’s length principle, expanded TPD requirements, and new powers of the Comptroller of Income Tax (“Comptroller”) to impose surcharges and penalties for TP non-compliance.
Transfer pricing documentation requirements
| Scope | Details |
|---|---|
| Who must prepare | Taxpayers fulfilling either of the two conditions below must prepare TPD:
a. Taxpayers with gross revenue from their trade or business1 for the basis period of more than $10 million b. Taxpayers who were required to prepare TPD under Section 34F for the previous basis period will continue to be required to do so for the subsequent basis period2 |
| Exemptions available | Taxpayers are exempt from preparing TPD for either:
|
| Format of report | Must be in English and must specify the date on which the TPD was completed |
| Content of report | As prescribed in the Second Schedule of the TPD Rules. |
| When to prepare | Not later than the filing due date of the tax return. |
| When to submit | IRAS does not require taxpayers to submit the TPD when they file their tax returns. Taxpayers should keep their TPD and submit it to IRAS within 30 days upon request. |
| When to refresh | Taxpayers are to review and refresh their TP documentation annually. This will result in taxpayers having to prepare a TP documentation for each basis period. |
| How long to retain | 5 years |
| Penalty for non-compliance | Fine not exceeding S$ 10,000. |
| Surcharge for non-compliance with arm’s length principle | Once a transfer pricing adjustment is made by IRAS, this adjustment is subject to a surcharge of 5% regardless of whether there is tax payable on the adjustment.
Self-initiated retrospective upward adjustments are similarly subject to a surcharge of 5% regardless of whether there is tax payable on the adjustments, unless remission is granted.
The following TP adjustments are not subject to the surcharge of 5%: a. Year-end adjustments when conditions are met; b. Compensating adjustment; c. Corresponding adjustment; and d. Adjustment made to implement the arbitration decision |
1Gross revenue derived from a trade or business excludes passive source income such as dividends, capital gains and losses. Taxpayer that only has passive source income will not come within TPD requirements of Section 34F.
2Condition (b) is put in place to ensure that taxpayers continue to prepare TPD once they are required to do it under condition (a). This provides certainty to taxpayers on their compliance efforts, especially where any decline in their gross revenue below S$10 million is temporary.
For more details, you are welcome to contact our expert team.