Transfer Pricing Administration

From Year of Assessment (YA) 2018, taxpayers must report certain details of related party transactions (RPT) if the value of RPT in the audited accounts for the financial year exceeds $15 million.

Reporting of Related Party Transactions

Purpose

The Form for Reporting of RPT (1.70MB) will provide IRAS with the relevant information to better assess companies' transfer pricing risks and improve on the enforcement of the arm's length requirement.

Filing Requirements and Threshold

From YA 2018, a company must complete the Form for Reporting of RPT (1.70MB) and submit it together with Form C if the value of RPT disclosed in the audited financial statements for the financial period exceeds S$15 million.

The value of the RPT is the sum of:

  1. all amounts received/ receivable from related parties and all amounts paid/ payable to related parties as reported in the Income Statement, but excluding compensation paid to key management personnel and dividends; and  
  2. year-end balances of loans and non-trade amounts due from/ to all related parties.

 For more information on the RPT requirement and some frequently asked questions, please refer to the Reporting of RPT (606KB).

Transfer Pricing Consultation

Purpose

Through the transfer pricing consultation (TPC) process, IRAS reviews and audits the transfer pricing methods and documentation of selected taxpayers to ensure that taxpayers comply with IRAS' transfer pricing guidelines.

TPC Process

The TPC process is illustrated in this flowchart.

TPC Process

Please refer to Part II, section 7 of the e-Tax Guide on Transfer Pricing Guidelines (1.46MB) for more details.

Surcharge for Non-Compliance with Arm's Length Principle

Effective from Year of Assessment 2019, when IRAS makes a transfer pricing adjustment under Section 34D of the Income Tax Act, a surcharge of 5% on the amount of transfer pricing adjustment will be imposed. The 5% surcharge will be imposed regardless of whether there is any additional tax payable resulting from the transfer pricing adjustment. IRAS may consider to remit wholly or in part the surcharge for any good cause.

Penalties for Non-Compliance with Transfer Pricing Documentation Requirements

With effect from Year of Assessment 2019, a fine not exceeding $10,000 may be imposed for the following offences:

  • Failure to prepare transfer pricing documentation in accordance to the prescribed timing or content;
  • Failure to submit transfer pricing documentation within 30 days from a request by IRAS;
  • Failure to retain transfer pricing documentation for a period of at least 5 years; or
  • Providing transfer pricing documentation that is false or misleading.

Overview of Mutual Agreement Procedures (MAPs)

MAP is a dispute resolution facility where Singapore taxpayers can apply to IRAS to enter into discussions with Singapore's tax treaty partners to eliminate any double taxation arising from transfer pricing adjustments.

IRAS will not entertain requests for elimination of double taxation from transfer pricing adjustments, outside of the MAP process.

If the taxpayer wishes to apply for MAP, the request must comply with the time limit stated in the relevant Avoidance of Double Taxation Agreement (DTA). Many DTAs state that a MAP application must be made within 3 years from the first notification of the action giving rise to taxation not in accordance with the terms of the DTA.

In general, IRAS aims to resolve a MAP case within 24 months from receiving the taxpayer's complete application.

Please refer to Part II, sections 8 and 9 of the e-Tax Guide on Transfer Pricing Guidelines (1.46MB) for more details.  

Overview of Advance Pricing Arrangements (APAs)

APA is a dispute prevention facility where IRAS and the taxpayer or relevant tax treaty partner agree in advance a set of criteria to ascertain the pricing of a taxpayer’s related party transactions for a specific period of time. 

APAs can be agreements between:

  • IRAS and the taxpayer (unilateral APA);
  • Agreements between IRAS and a tax treaty partner on the transfer pricing between entities in their respective countries (bilateral APA); or
  • Agreements between IRAS and 2 or more tax treaty partners on the transfer pricing between entities in their respective countries (multilateral APA).

The level of certainty in a unilateral APA is lower than a bilateral or multilateral APA. This is because the APA terms are non-binding on the foreign tax authority which is not a party to the unilateral APA process.

If Singapore does not have a DTA with the other tax jurisdictions, the unilateral APA comes under the framework of Singapore's Advance Ruling System and a fee will be charged. If Singapore has a DTA with the other jurisdiction, the unilateral APA will be issued outside of the Advance Ruling System, and no fee will be charged for the unilateral APA.

The  Final Report on Action 5 “Countering Harmful Tax Practices More Effectively, taking into Account Transparency and Substance” published by the OECD in October 2015 sets out an agreed framework for the compulsory spontaneous exchange of information in respect of rulings. Under the framework, IRAS will spontaneously exchange information on cross-border unilateral APAs with certain jurisdictions.

Please refer to Part II, sections 8 and 10 of the e-Tax Guide on Transfer Pricing Guidelines (1.46MB) for more details, including the administrative process of applying for an APA.

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