Changes to Singapore Transfer Pricing Guidelines

Posted by Reading Time: 4 minutes

By Sowmya Varadharajan

 2012_Flag_of_Singapore_PhotoOn 6th January 2015, the Inland Revenue Authority of Singapore (“IRAS”) released revised transfer pricing guidelines, providing a better defined view of how the IRAS will handle transfer pricing matters. These guidelines call for taxpayers to prepare and maintain contemporary transfer pricing documentation. In addition, they specify thresholds for related party transactions that need to be covered by pertinent transfer pricing documentation.

Although these guidelines consolidate the previous guidance that has been previously provided by the IRAS, there are several new concepts and positions that have been put forth in these revised guidelines.

Related-Reading-Icon-Asean Link RELATED: Singapore: IRAS Consultation on Transfer Pricing Documentation


  1. Need for Transaction Specific Analysis

The IRAS has explicitly noted that the arm’s length principle should be applied on a transaction-by- transaction basis, which suggests that each transaction (tangible or intangible property/ intercompany financing / services) should be analysed on a stand-alone basis. This will increase the onus of preparation of transfer pricing documentation. IRAS’ intention of requiring transaction specific analyses is also evident in the examples that IRAS has provided in the transfer pricing guidelines.

  1. Thresholds for Related Party Transactions

In order to reduce the compliance burden for Singapore taxpayers, the IRAS provided a thresholds for a range of related party transactions. Taxpayers will have to review their related party transaction values to determine if they meet the thresholds. Transactions that do not meet the threshold values have to be supported by way of transfer pricing documentation, consistent with the documentation requirements in the revised guidelines.

  1. Guidance on Preparation and Maintenance of Transfer Pricing Documentation

The revised transfer pricing guidelines requires Singapore taxpayers to maintain contemporaneous documentation on a going forward basis. In addition, the detailed information that is required to be maintained as part of the transfer pricing documentation consists of information at the entity level as well as the group level. Additional information at the Group level has been requested by IRAS. The need for contemporaneous documentation suggests an annual compliance exercise for Singapore taxpayers.

  1. Guidance on Economic Analysis and Benchmarking

The IRAS has provided much needed guidance on its position on benchmarking. Guidance includes the use of databases, treatment of public vs. private companies, as well as use of loss making comparable companies to justify lower margins. Such guidance will enable taxpayers to employ quantitative, objective screens to justify the selection of comparable companies in benchmarking studies.

  1. Introduction of a Penalty Regime

There was no mention of penalties for lack or insufficiency of transfer pricing documentation under the 2006 Transfer Pricing Guidelines. The revised guidelines, however, note that if the taxpayer is not able to provide the transfer pricing documentation upon request, they can be penalized under the Income Tax Act.

  1. Transfer Pricing Consultation (“TPC”) Process

Additional guidance has been provided on the TPC process whereby IRAS will engage with taxpayers to review the adequacy and timeliness of transfer pricing documentation, as well as the arm’s length outcome of the taxpayers. As a result of the TPC, it is possible that a tax adjustment may be proposed if the taxable profit arising from the related party transactions is not consistent with the arm’s length standard.

  1. Negotiating a Mutual Agreement Procedure (“MAP”)

In these revised guidelines, the IRAS has also provided guidance to taxpayers who are interested in negotiating a MAP with the IRAS. The IRAS has provided procedural guidance similar to negotiating an APA which includes timelines that should be adhered to, as well the information that will be required.

  1. Transfer Pricing Adjustments

The IRAS has provided detailed guidance on adjustments that are related to transfer pricing and conditions under which these adjustments will either be accepted or rejected by the IRAS. The adjustments covered by the IRAS are classified as year-end adjustments arising from year-end closing, compensating adjustments, self-initiated retrospective adjustments and tax authority initiated corresponding adjustments.

Sowmya Varadharajan, is a founding director of IC Advisors Pte Ltd, a transfer pricing consulting firm.  Sowmya has more than 12 years of experience assisting clients in designing, supporting and defending various related party transaction structures.  Having been trained in the U.S., Sowmya currently focuses her attention on helping clients in the Asia Pacific region address their transfer pricing issues. 

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates, a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. Dezan Shira & Associates is a full member of the American, European and British Chambers of Commerce in Singapore. For further information, please contact the firm at or visit the practice at   

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