Singapore
1. TP legislation/guidelines
Inland Authority of Singapore (“IRAS”) issued TP guidelines on 23 February 2006, followed by supplementary TP guidelines on related party loans and related party services issued on 23 February 2009. Subsequently, section 34D of the Singapore Income Tax Act has been introduced to ensure that related party transactions are conducted on arm’s length basis.
3. TP audits done by tax authority
IRAS, under the TP consultation process, may target taxpayers with substantial cross border related party transactions as well as taxpayers making continues losses. IRAS will assess the adequacy of the taxpayer’s compliance with the arm’s length principles for intra-group transactions and may make adjustments if profits are not at arm’s length.
4. Advance Pricing Arrangement
IRAS issued the Supplementary Guidance on Advance Pricing Arrangement (“APA”) on 20 Oct 2008. Taxpayers can avail themselves to APA’s where appropriate.
5. Mutual Agreement Procedures
Singapore as a treaty partner to more than 60 double tax treaties subscribes to the mutual agreement procedures generally as prescribed under Article 25 of the OECD model tax convention.
6. Basis to recover intra-group service charges
IRAS accepts the cost plus 5% mark up as an arm’s length service fee charge for routine support services rendered between intra-group and related companies.
IRAS expects non-routine support services to be charged and recovered on arm’s length basis that is commensurate with the industry practice and/or substantiated by proper bench marking studies or analysis.
7. Cross border management fee charges
Taxpayers are allowed deduction for such charges from overseas holding company or head office provided they are charged on arm’s length basis that is commensurate with the services provided. There is a 17% withholding tax if such services are rendered in Singapore subject to tax treaty provisions.
8. Inter-company loans
Lenders can extend inter-company loans within Singapore interest free subject to interest restriction on their non-income producing and/or non-trade balances.
However, with effect from 1 January 2011, cross border inter-company loans will be required to be charged an arm’s length interest rate. There is a 15% withholding tax on interest payment to non-residents, subject to tax treaty provisions.
There is no thin capital rule.
9. Transfer pricing penalties
The general penalty rules in the Income Tax Legislation will apply.
Updated: Aug 2011
This publication has been prepared for the purpose of quick information dissemination to our counterparts in other Countries. Its contents should not be used as a basis for advice or formulating decisions under any circumstances.
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