2006First time introduction of Transfer Pricing Guidelines by Internal Revenue Authority of Singapore (IRAS).


2008IRAS releases circular for Transfer Pricing Consultation (TPC) and guidelines on Advance Pricing Agreement (APA).


2009Issuance of guidelines on related party loans and services. Further, a new section

34D was enacted under Income Tax Act to tax related party transactions.


2015IRAS issues revised Transfer Pricing Guidelines, 2015 which replaces all previous guidelines and circulars


2016IRAS issues guidelines with respect to applicability of Country by Country Reporting (CbCR) for Singapore MNE groups


2017IRAS issues the updated (fourth edition) Transfer Pricing Guidelines and Income Tax Amendment (2017) Bill effective from 12

January 2017



IRAS applies the internationally endorsed arm’s length principle. If taxpayers do not comply with the arm’s length principle and have understated their profits, IRAS will adjust their profits upwards as provided in section 34D of the Income Tax Act. Section 34D of SITA provides that if two persons are related parties & conditions are made or imposed between the two persons in their commercial or financial relations that differ from those that would be made if they were not related parties, then any profits that would but for those conditions have occurred to one of the persons and by reason of those conditions have

not so occurred may be included in the profits of the that person for income tax purpose.

Further, where a person carries on business through Permanent Establishment (PE), then legislation requires such PE to be regarded as separate distinct person. Related Party

As per sections 13(16) of IT Act, related party covers

Exemptions and thresholds

Broadly, guidelines provide exemption from documentation requirements in following cases:

  • Domestic related party transactions (other than loans) in case where both parties are subject to same Singapore tax rates;
  • Domestic related party loan transactions where the

lender is not engaged in business of borrowing or lending;

  • Taxpayer applies the specified indicative margins for related party loans;
  • Routine support services wherein taxpayer chooses to apply cost plus mark up of 5%;
  • Transactions covered under advance pricing agreements



Further, guidelines provide below threshold limits for documentation requirements:


Threshold Limit


one person controlled directly/indirectly by another

Category of transaction



Person or vice-versa, or where both of them are


Controlled directly/indirectly by a common person.

Transfer pricing documentation

Contemporaneous documentation

Taxpayers need to maintain contemporaneous

Purchase of goods                     15 million




Sale of goods                               15 million


Loans availed                             15 million


documentation wherein documentation or information                                                                                                                                                               


available prior to or at the time of undertaking related

Loans provided                       15 million


party transactions needs to be considered. The date of                                                                                                                                                                 


creation or update of each document should be stated in the document.

However for ease of compliance, guidelines provide that IRAS will accept documentation prepared at any time before due date of filing return as contemporaneous documentation.

Extent of documentation

Taxpayers are typically required to prepare two tier of documentation:


Group level

  • General information on the group;
  • Description of group’s business relevant to the taxpayer;
  • Group’s financial position.


Entity level

  • General information on the taxpayer;

All other categories of transactions Examples:

  • Service income
  • Service payment
  • Royalty income
  • Royalty expense
  • Rental income
  • Rental expense
  • Guarantee Income
  • Guarantee Expense


Arm’s length principle


Three-step approach







1 million per category of transactions


  • Description of the taxpayer’s business;
  • Details of related party transactions;
  • Transfer pricing analysis / benchmarking.


Country-by-Country Report

As per the recent guidelines, in relation to a financial year beginning on or after 1 January 2017, in case of taxpayer being the ultimate parent entity of a Singapore multinational enterprise (“MNE”) group and the consolidated group revenue of such MNE group was at least SGD 1,125 million in the preceding financial year, then, in addition to the two-tier TP documentation, it would also be required to prepare and file Country-by-country reporting in the prescribed format.

In line with Organisation of Economic Co-operation and Development’s (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines), IRAS endorses arm’s length principle as a standard to guide transfer pricing. In this regards, the guidelines recommend below three-step approach to apply arm’s length principle:


Step 1: Conduct comparability analysis


Step 2: Identify the most appropriate transfer pricing method and tested party


Step 3: Determine the arm’s length results.


Usage of multiple year data

To enhance the reliability of the comparability analysis, taxpayers need to examine multiple year data as opposed to single year data so as to evaluate factors that influence transfer prices, such as long term arrangements, business / product life cycles, etc.


Selection of comparables

IRAS recommends taxpayers to use comparables with publicly available information whereby such information can be readily obtained from various sources and verified and reliable analyses may be conducted. Further, IRAS does not give preference to any particular database.


In this regards, a company that is listed on a stock exchange is considered as better comparable than the one that is

not listed. Moreover, local comparables are required to be given preference over non-local comparables. However,

in case where sufficiently reliable local comparables are not available, the search may be extended to regional comparables.


Selection of method

Guidelines recognise five internationally accepted benchmarking methods for evaluating transfer prices. Further, IRAS does not give preference to any specific method or methods and the taxpayers are independent to choose most appropriate method based on facts and circumstances of each case.


Taxpayers may also choose other more appropriate methods or use a combination of various methods to comply with the arm’s length principle.


Inter-quartile range

Taxpayer can apply inter-quarter range to increase reliability of the comparability analysis. However, taxpayer may even use full range in case where all the points of dataset are equally reliable.



Certain specific transactions


Intra-group services

Taxpayers need to apply ‘Benefit Test’ to substantiate that recipient of intra-group services actually receives or expect to receive benefits from such services.


Further, guidelines provide that strict pass through costs of services may be charged to related parties without any mark up. However, the service provider to ensure to

charge appropriate arm’s length mark-up for its function in arranging and paying for such pass through services.


Routine support services

Taxpayer can opt to apply cost plus mark up of 5% on certain specified routine support intra-group services so as to avoid compliance burden in this regards.

Further, in case where routine support services are acquired at group level on cost pooling basis then proportionate

share may be charged to related parties without any mark up.


Intra-group loans

In case of domestic related party loan provided by taxpayer who is not engaged in the business of lending or borrowing, the guidelines mandate taxpayer to restrict interest deduction as a proxy to ALP wherein the taxpayer cannot claim deduction for interest at rate higher than the rate at which it has granted loan to related party.


In case of cross border related party loan (other than the specified loans where indicative margins are applied) or domestic related party loan wherein the lender is engaged in business of lending or borrowing, the taxpayers need

to prepare detailed transfer pricing documentation and

comply with arm’s length principle.


In case of related party loans not exceeding SGD 15 million at the time when loan is obtained or provided, and indicative margins as specified are applied to such loans, then the taxpayer can choose to take the benefit of not performing the detailed transfer pricing analysis for such loans.


Attribution of profits to Permanent Establishments


Guidelines provide that no further attribution of profits to the permanent establishment is required provided taxpayer receives an arm’s length remuneration from its foreign related party and other conditions in this regards are fulfilled.





Income tax return

Income tax return needs to be filed by November 30 of the year following the year of closing books.


Submission of documentation

Taxpayers are not required to submit documentation on annual basis. However, same needs to be submitted to IRAS within 30 days of request.


Transfer pricing audit/assessment

IRAS selects taxpayers for consultation (audit) based on risk indicators, such as:


  • Value of related party transactions;


  • Performance of taxpayer’s business over time;


  • Likelihood that taxable profits may have been understated by inappropriate transfer pricing.


During consultation, IRAS may require taxpayer to provide transfer pricing documentation and additional information or documents.


APA and MAP procedures

Taxpayer may apply for unilateral, bilateral or multilateral Advance Pricing Agreement (APA) for a period of 3 to 5 years. Moreover, taxpayer can also apply for rollback provisions for

2 preceding financial years in case of bilateral or multilateral



Taxpayer may also apply for Mutual Agreement Procedure (MAP) within time limit as may be applicable as per relevant tax treaty.


Penalties and other consequences of non-compliance

As of now, no specific penalties have been introduced for transfer pricing. However, new guidelines explicitly states that IRAS is monitoring the compliance level and may, if necessary, consider more stringent measures including specific record-keeping regulations for transfer pricing.


In case of contravention, authorities may levy below general penalties prescribed under Income Tax Act:




Offence                           Penalty

Non-compliance with documentation requirements will lead to following consequences:


  • IRAS will not accept year end adjustments by taxpayer in transfer prices;


  • Increased possibility of IRAS declining APA request in future;


  • IRAS may also not support taxpayer for MAP to resolve double taxation.



BEPS/CbC applicability

In line with the BEPS Action Plan 13, Singapore will be implementing CbCR requirements for Singapore MNE groups from FY 2017 onwards.


Applicability of CbCR, where:


  1. It is a Singapore MNE group.


  1. Consolidated group revenue in preceeding FY is atleast

S$1,125 million.


  1. c. MNE group has subsidiaries/operations in atleast 1 foreign jurisdicati


Omitting or

understating of income


Omitting or understating of income without reasonable cause or through negligence


Omitting income with willful intent to evade tax





Preparation or mainte- nance of false books / records; or any other fraud to evade tax



Any other offence under Income Tax Act for which no specific penalty is provided

  • Amount of tax



  • Two times the amount of tax adjustment; and
  • Fine upto SGD 5,000 or imprisonment upto three years or both.


  • Two times the amount of tax adjustment; and
  • Fine upto SGD 10,000 or imprisonment upto three years or both.


  • Four times the amount of tax adjustment; and
  • Fine upto SGD 50,000 or imprisonment upto five years or both.


  • Fine upto SGD 1,000;
  • In case of default in the payment of fine, imprisonment upto six months.

The CbCR report is required to be submitted to the

Comptroller within 12 months from the end of that FY.






Effective from                     •   Original transfer pricing guidelines were effective from 23rd February



  • Revised comprehensive guidelines are applicable from 6th February 2015, which were further updated in January 2017.




Compliance requirements

  • Arm’s length principle applicable in all related party transactions.


  • Contemporaneous documentation applicable subject to specified threshold limits.





Penalties                           No specific penalties for transfer pricing non-compliances. However, penalties under general provisions applicable.





Method anPreferencfor comparable

  • 5 methods as defined by OECD are applicable without any hierarchy.


  • Listed company is considered as better comparable than the unlisted one.


  • Local comparables should be given preference over non-local comparables.





Peculiar features               •   2 layers of documentation to be prepared i.e. Group level & Entity level


  • Need to apply ‘Benefit Test’ with respect to the intra group services


  • In case of PE, no further attribution of profits is required provided taxpayer receives an arm’s length remuneration from its foreign related party



Safe harbour and APA     •   No specific provisions for safe harbour. However, taxpayers can opt to apply cost plus mark up of 5% on specified intra-group routine support services and the specified indicative margins on the related party loans, so as to avoid compliance burden for these   transactions.


  • Taxpayer can apply for unilateral, bilateral or multilateral APA for a period of 3-5 years. Moreover, rollback application can be made upto 2 preceding years in case of bilateral or multilateral APA.







It is applicable from the FY 2017 onwards for Singapore MNE groups having consolidated group turnover in the preceding FY beyond the specified threshold.


About us

Natarajan & Swaminathan is currently servicing the largest number of Indian companies in


Natarajan & Swaminathan is committed to excellence in services. It provides a full range of advisory, assurance, financial due diligence, risk management, fraud investigation, dispute resolution, and tax and liquidation services.

Natarajan & Swaminathan is a professional chartered accountant firm in Singapore founded in 1950 by two partners namely late Mr. S. Natarajan and late Mr. K. Swaminathan. Thereafter Mr. R. Krishnaswamy, joined the firm and brought his younger brother Mr. R. Narayanamohan during the year 1976 and was admitted as a partner in 1978. In1990, the firm was taken over by Mr. R. Narayanamohan


The Group has ventured into new horizons. Having been instrumental in numerous Indian companies setting up operations in Singapore, Natarajan & Swaminathan provides business and audit services to companies worldwide, including industry leaders like Mustafa and the Modi Group of Companies.


Today, Natarajan & Swaminathan has associate companies that have ventured into Global Tax Advisory services, Back Office Processing services, Human Resource, Immigration related services, Corporate Secretarial Services, Company Incorporation and Business Consulting.


Our affiliated companies have their presence in Hong Kong, Malaysia, Dubai and UK as well. These companies provide advisory services in the field of company incorporation, business and management consultancy, back office processing, payroll and all related services for carrying out the business operations.

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