The Inland Revenue Authority of Singapore (IRAS) updated its transfer pricing (TP) guidelines on 10 August 2021, with the release of the IRAS e-Tax Guide: Transfer Pricing Guidelines (Sixth Edition) (“Revised TPG“). In line with Singapore’s approach to be aligned with international standards, the changes are generally consistent with the OECD’s “Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations” published on 10 July 2017 (“OECD Transfer Pricing Guidelines“). IRAS has provided additional guidance and clarification with respect to TP documentation (TPD) compliance, surcharges on TP adjustments, advanced pricing arrangements (APA) and mutual agreement procedure (MAP) requests.
In this alert, we discuss the Revised TPG and consider its impact on taxpayers.
- Moving forward, there will be a greater focus from IRAS in requiring robust TP analysis and TPD that fulfils Singapore TPD requirements. Taxpayers should consider whether the newly introduced administrative concessions could reduce their compliance burden. Taxpayers should also review their existing TPD, as well as their plans to prepare TP analysis and TPD going forward in light of the changes.
- Additional guidance on cost contribution arrangements (CCAs) and financial transactions are provided.
- IRAS would consider remitting the 5% surcharge applied on TP adjustments in certain circumstances. The surcharges are likely to have significant financial impact, and getting a remission is particularly important for multinational enterprise (MNE) groups with subsidiaries in Singapore where the surcharge is not creditable in the jurisdiction of the holding company. Taxpayers should ensure proper TPD is maintained, as well as consider the benefits of providing prompt voluntary disclosures where TP issues have been identified.
- Taxpayers should thoroughly review transactions relating to APA requests to ensure that there are bona fide commercial reasons for the transactions, and that these do not have the main objective of reducing or avoiding tax. Taxpayers will have to explain and justify any changes to TP methodology where there are no significant changes to the facts and circumstances.
- IRAS raises the availability of arbitration under certain Avoidance of Double Taxation Agreements (DTAs) to resolve TP disputes that cannot be settled under a MAP within a certain period, subject to certain conditions being met.
- Where TP adjustments are made by foreign tax authorities, IRAS will not allow an additional tax deduction claim and will not allow the refund of taxes previously withheld in the absence of a MAP application.