Transfer pricing is the pricing of transactions between related parties, such as sale or purchase of goods, provision of services, use or transfer of intangibles, etc.

Introduction to Transfer Pricing

Taxpayers are to apply the arm's length principle to ensure that the pricing of their transactions with their related parties reflects independent pricing. Two parties are related if either party controls the other, or they are under the common control of another party, whether directly or indirectly. Related parties include branches and head offices. 

Taxpayers are to prepare and keep contemporaneous transfer pricing documentation to show that their related party transactions are conducted at arm’s length.

The Arm’s Length Principle

IRAS endorses the arm's length principle, an internationally endorsed standard, to guide the pricing of transactions between related parties. IRAS subscribes to the principle that profits should be taxed where the real economic activities generating the profits are performed and where value is created. A proper application of transfer pricing rules will ensure this outcome.

The arm's length principle requires that transfer prices between related parties are equivalent to prices that unrelated parties would have charged under the same or comparable circumstances.

IRAS recommends that you adopt the following 3-step approach to apply the arm's length principle in your related party transactions:

  • Step 1 - Conduct a comparability analysis to identify situations or transactions undertaken by unrelated parties that are comparable to the situations or transactions undertaken between related parties
  • Step 2 - Identify the most appropriate transfer pricing method and tested party
  • Step 3 - Determine the arm's length results

Application of 3-step approach

CUP: Comparable uncontrolled price
TNMM: Transactional net margin method

Learn more about the 3-step approach (PDF, 1.48MB) (refer to section 5).

Transfer Pricing Adjustment and Surcharge for Non-Compliance with Arm's Length Principle

Where the pricing of related party transactions is not at arm's length and results in a reduced profit for the Singapore taxpayer, IRAS will consider increasing the profit of the Singapore taxpayer to the arm's length amount under Section 34D of the Income Tax Act 1947. Such adjustment will either increase the amount of income or reduce the amount of deduction or loss of the Singapore taxpayer.

Effective from the Year of Assessment (YA) 2019, when IRAS makes a transfer pricing adjustment under Section 34D, 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 remitting wholly or in part the surcharge for any good cause.

Learn more about the transfer pricing adjustment and surcharge for non-compliance with the arm’s length principle (PDF, 1.48MB) (refer to sections 8 and 9).

Transfer Pricing Documentation

You must prepare and keep contemporaneous transfer pricing documentation to show that your related party transactions are conducted at arm's length.

Contemporaneous transfer pricing documentation refers to documentation and information that you have relied on to determine the transfer prices for related party transactions prior to or at the time of undertaking the transactions. IRAS also accepts transfer pricing documentation as contemporaneous when the documentation has been prepared not later than the filing due date of the Income Tax Return for the financial year in which the transactions took place.

In preparing contemporaneous transfer pricing documentation, you must use the latest information and data available at the time to show how the transfer prices for the transactions are determined or supported.

The preparation and maintenance of transfer pricing documentation facilitate review by tax authorities and therefore help resolve any transfer pricing issue that may arise. If taxpayers are unable to show that their transfer prices are at arm’s length through their transfer pricing documentation or they do not have transfer pricing documentation, they may suffer adverse consequences, such as double taxation arising from transfer pricing adjustment by IRAS or foreign tax authorities, penalties, etc.

Transfer Pricing Documentation Requirements

With effect from the Year of Assessment (YA) 2019, you are required to prepare transfer pricing documentation under Section 34F of the Income Tax Act 1947 if you meet certain conditions, unless exemption for specified transactions applies. If you are not required to prepare transfer pricing documentation under Section 34F, you are nonetheless encouraged to do so to better manage your transfer pricing risks.

A summary of transfer pricing documentation requirements under Section 34F is as follows:

ScopeTransfer pricing documentation requirements
Who must prepare

Taxpayers who meet either of the following conditions:

  • Gross revenue derived from their trade or business is more than $10 million for the basis period concerned; or
  • Transfer pricing documentation was required to be prepared for the basis period immediately before the basis period concerned
What to prepare

Information as prescribed in the Income Tax (Transfer Pricing Documentation) Rules 2018:

  • An overview of the businesses of the group (in which the taxpayer is a member) that are relevant to the business operations in Singapore; and
  • More detailed information on the taxpayer's business and the transactions with its related parties. The required information includes functional analysis and transfer pricing analysis of the taxpayer’s business and transactions
Exemption from documentation requirementsThe exemptions are prescribed in the Income Tax (Transfer Pricing Documentation) Rules 2018. Such exemptions include related party domestic transactions subject to the same tax rate and related party transactions where the value of each transaction does not exceed certain thresholds.
When to complete documentationBy the filing due date of the Income Tax Return
When to submitTaxpayers do not need to submit the transfer pricing documentation when they file their Income Tax Returns. They are, however, required to submit the transfer pricing documentation within 30 days of a request by IRAS.
When to refresh transfer pricing documentationAs long as the details in the transfer pricing documentation remain accurate, taxpayers may refresh their transfer pricing documentation once every 3 years if they meet the conditions for simplified transfer pricing documentation.
How long to retain documentationAt least 5 years from the end of the basis period in which the transaction took place
Penalty for non-complianceA fine not exceeding $10,000

Learn more about transfer pricing documentation requirements (PDF, 1.48MB) (refer to section 6).

Penalty for Non-Compliance with Transfer Pricing Documentation Requirements

Effective from YA 2019, a taxpayer is liable to a fine not exceeding $10,000 if it commits the following offences:

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

Learn more about the penalty for non-compliance with transfer pricing documentation requirements (PDF, 1.48MB) (refer to section 9).


  1. A Singapore company is part of a multinational corporate group and its transfer pricing policy is determined by the overseas headquarters. The Singapore company may not be involved in the determination of its transfer prices. Moreover, as its related party transactions are relatively insignificant compared to those of other group members, there is no transfer pricing study conducted specifically for the Singapore company. The Singapore company’s transactions do not qualify for exemption from transfer pricing documentation. Can the Singapore company rely on the transfer pricing documentation pertaining to the group’s overall transfer pricing policy for the purpose of Section 34F of the Income Tax Act 1947?

    Although the Singapore company is not involved in determining the group’s overall transfer pricing policy, it must seek to understand how that transfer pricing policy is applied to its related party transactions, determine if that transfer pricing policy is consistent with IRAS’ transfer pricing guidelines and conduct regular reviews with its headquarters or other relevant group members to ensure compliance with the arm's length principle.

    The Singapore company must ensure that the transfer pricing documentation prepared by the corporate group supports the arm's length pricing of the Singapore company's related party transactions and contains details similar to those prescribed in the Income Tax (Transfer Pricing Documentation) Rules 2018. If not, the Singapore company must either prepare transfer pricing documentation in accordance with the Income Tax (Transfer Pricing Documentation) Rules 2018 or supplement the transfer pricing documentation prepared by the corporate group with information required by IRAS at the Group and Entity levels if such information have not been included.

  2. A Singapore company regularly pays an overseas related party for the costs of performing administrative services. What is the transfer pricing documentation required for such an arrangement?

    Assuming that the Singapore company meets the conditions under Section 34F of the Income Tax Act 1947 for the preparation of transfer pricing documentation, the information to be included in its transfer pricing documentation are as prescribed in the Income Tax (Transfer Pricing Documentation) Rules 2018. It will also be useful if the Singapore company keeps records to explain the services provided by the overseas related party, the benefits it received and the basis used to compute the billed amount. Otherwise, there would not be clarity on the services that the Singapore company is paying for and whether the amounts charged are reasonable.

    For example, the Singapore company should enter into a written contract with the overseas related party detailing the services to be provided and how the amount of service charge is determined. There should also be checks in place to make sure that the terms of the contract are adhered to before paying each bill.

  3. A Singapore company provides services to its overseas related parties. The remuneration for these services is bundled together with the price of goods supplied by the Singapore company to the same overseas related parties. Is such a practice acceptable to IRAS for transfer pricing purposes?

    In this case, IRAS will review whether the price of goods sold, reduced by an arm's length remuneration for the provision of the services, is at arm's length. In other words, there should be evidence to show that there is indeed a component embedded in the price of goods sold that represents the value of the services provided by the Singapore company to its overseas related parties. Alternatively, if similar goods bundled with services are provided by the Singapore company or its related entities to independent parties under similar circumstances, the bundled price of such unrelated party transactions can be used for comparison.

  4. A Singapore company has a transfer pricing study in place and has prepared proper documentation on the transfer pricing study. Does the Singapore company need to seek IRAS’ agreement before implementing the transfer price established in the transfer pricing study?

    The Singapore company does not need to seek IRAS' agreement to implement the transfer price established through its transfer pricing study. The Singapore company is also not required to submit the transfer pricing documentation with its Corporate Income Tax Returns unless IRAS requests for it, in which case, the Singapore company is to submit the transfer pricing documentation within 30 days from IRAS’ request.

Transfer Pricing Compliance

Transfer Pricing Audit (TPA)

IRAS carries out TPA to review the transfer pricing and transfer pricing documentation of taxpayers to ensure they comply with the arm’s length principle and transfer pricing documentation requirements.

The TPA process is illustrated in this flowchart:

TPA Process

Learn more about the TPA process (PDF, 1.48MB) (refer to section 7).

Dispute Prevention & Resolution

Flowchart for Preventing and Resolving Transfer Pricing Disputes

What is an Advance Pricing Arrangement (APA)

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

Learn more about APA.

What is a Mutual Agreement Procedure (MAP)

MAP is a dispute resolution facility provided under the MAP article in our Avoidance of Double Taxation Agreements (DTAs). Under MAP, IRAS and the relevant foreign competent authority (CA) resolve disputes regarding the application of the DTA. Usually, a MAP is entered into between 2 CAs, but it is also possible for IRAS to enter into a multilateral MAP involving 3 or more CAs.

Learn more about MAP.

What is Arbitration

Arbitration offers a recourse to resolve issues that have reached stalemate in MAP discussion. 

Learn more about arbitration.

Other Matters

Applying the Arm’s Length Principle to Cost Contribution Arrangements

In place of multiple intra-group arrangements, members of a group may enter into a cost contribution arrangement (CCA) to share the development of intangibles or tangible assets or to obtain services from each other. For a CCA to satisfy the arm’s length principle:

  1. All the participants to the CCA must share the upside and downside consequences of the risks associated with achieving the anticipated CCA outcomes;
  2. The value of the participants’ contributions to the CCA must be consistent with what independent parties would have agreed to contribute under comparable circumstances given their proportionate share of the total anticipated benefits; and
  3. Each participant’s share of the actual overall contributions to a CCA must be proportionate to its share of the overall expected benefits to be received under the CCA.

Learn more about the application of the arm’s length principle to CCAs (PDF, 1.48MB) (refer to section 17).

Attribution of Profits to Permanent Establishments (PEs)

At times, the activities performed by a company in Singapore for its overseas related company may create for the overseas company a PE in Singapore. Profits that are attributable to the PE are liable to tax in Singapore.

However, if all the following conditions are met, there will be no attribution of profits to the PE and thus, there will be no Singapore tax liability for the overseas company arising from the inter-company service arrangement:

  1. The Singapore company receives an arm's length fee from the overseas company that is commensurate with the functions performed, assets used and risks assumed by the Singapore company;
  2. The fee paid by the overseas company to the Singapore company is supported by adequate transfer pricing documentation to demonstrate compliance with the arm's length principle; and 
  3. The overseas company does not perform any functions, use any assets or assume any risks in Singapore, other than those arising from the activities carried out by the Singapore company under the inter-company service arrangement.

Country-by-Country (CbC) Reporting

Singapore-headquartered multinational enterprises (MNEs) meeting certain conditions are required to prepare and file CbC Reports with IRAS for financial years (FYs) beginning on or after 1 Jan 2017. These CbC Reports are supplementary to the transfer pricing documentation maintained by MNEs.

Learn more about CbC Reporting.

You may refer to other guidance relating to transfer pricing: