A. TP Guidelines
Prior to 2019, Singapore taxpayers were not legally required to prepare and maintain Transfer Pricing documentation. The change is due to the strengthening of legislative requirements concerning Transfer Pricing which added Section 34F in the Singapore Income Tax Act (“SITA”) in October 2017. These were followed by the introduction of the Income Tax (Transfer Pricing Documentation) Rules 2018 (“Rules”) in February 2018 under powers conferred by Section 7(1) of the SITA. The Fifth edition of the IRAS e-tax guide on Transfer Pricing guidelines was also released concurrently with the Rules.
Effective from year of assessment (“YA”) 2019 (i.e., fiscal year ended 2018), taxpayers who met either of the following conditions are required to prepare Transfer Pricing documentation no later than the filing due date unless exempted:
- 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
From YA 2020 onwards, Singapore companies must also examine their Transfer Pricing status for the preceding year(s), which will further complicate the compliance process.
Taxpayers are exempt from preparing TP documentation if they meet either of the following conditions:
- Related party domestic transaction subject to same tax rate or exempt from Singapore tax for both parties; or
- Related party domestic loan where the lender is not in the business of borrowing and lending money; or
- Related party loan not exceeding S$15million on which indicative margin is applied; or
- Routine support services on which 5% cost mark-up is applied; or
- Related party transaction covered by Advance Pricing Arrangement (“APA”); or
- Related party transaction not exceeding certain value
|Threshold for exemption from Transfer Pricing documentation|
|Type of Transactions||Aggregated Value (S$)|
|Sales / Purchase of goods||15 million|
|Loan to / from related party|
|Provision / Receipt of service||1 million|
|Grant / Receipt of right to use property or lease|
|Guarantee provided / received|
|Any other transaction|
The Transfer Pricing documentation consists of two-tiered structure with brief contents as follows:
- Documentation at Group level
- Group’s organizational structure
- Group’s business
- Group’s intangible assets
- Group’s financial activities
- Group’s financial statements
- Group’s unilateral APA and others
- Documentation at Entity level
- Management structure
- Organizational structure
- Entity’s business
- Related party transactions
- Transfer Pricing analysis
While the TP documentation has to be prepared, it does not need to be submitted unless requested by the tax authorities.
B. Country-by-Country Reporting (“CbyCR”)
CbyCR is required for an MNE group in relation to a financial year beginning on or after 1 January 2017, where:
- The MNE group’s ultimate parent entity is tax resident in Singapore (hereinafter referred to “Singapore MNE group”); and
- The consolidated group revenue in the preceding financial year is at least S$1,125 million; and
- The MNE group has subsidiaries or operations in at least one foreign jurisdiction.
If the Singapore MNE group is required to file a CbyCR for a financial year, the Reporting Entity (i.e. ultimate parent entity) will be required to submit a CbyCR to the Comptroller within 12 months from the end of that financial year (i.e. 31 December 2020 if the taxpayer’s year end is 31 December 2019).
There is no CbyCR notification requirement in Singapore. Nonetheless, Singapore-headquartered MNEs which have a filing obligation in Singapore will be required to provide the following information to the IRAS at least three months before the filing deadline via email:
- Name and UEN of the Reporting Entity (i.e. ultimate parent entity)
- Financial reporting period of the Reporting Entity (i.e. ultimate parent entity) (DD/MM/YYYY to DD/MM/YYYY)
- Contact person’s name and contact number
- Email of contact person (if different from that used to provide your reply)
- CbyCR preparation and submission
Contents of CbyCR:
- Overview of income, taxes, employees and assets of the MNE group in different tax jurisdictions
- Overview of the entities (including permanent establishments) of the MNE group in different tax jurisdictions
- Additional information which provides further clarification regarding the data provided in the Country-by-Country Report
C. Penalties Imposed for Non-Compliance
- Transfer Pricing Documentation
Under Section 34F(8) of the SITA, failure to prepare the required Transfer Pricing documentation constitutes an offence, and the taxpayer is liable to a fine/penalty of up to S$10,000 per offence. More specifically, a taxpayer can be liable to the fine for the following non-compliance:
- Not preparing or maintaining transfer pricing documentation based on the requirements under the rules;
- Not preparing transfer pricing documentation by the time for the making of the tax return;
- Not retaining the transfer pricing documentation for a period of 5 years;
- Not submitting the transfer pricing documentation within 30 days from written request by the IRAS; or
- Providing any documentation or information that the taxpayer knows to be false or misleading.
Moreover, Section 34E empowers the Comptroller to impose a 5% surcharge on any Transfer Pricing adjustments made by the Comptroller for non-compliance with the arm length principle after an assessment. This surcharge applies even if the taxpayer has prepared contemporaneous documentation.
Failure to file the CbyCR by due date will be imposed a penalty up to S$ 1,000. If the penalty is not paid, the person responsible for the offence may be imprisoned for up to six months. An additional penalty of up to $50 per day during will be imposed during which the offence continues after conviction.
A penalty of up to S$ 10,000 applies to taxpayer which provides false or misleading information in the CbyCR. The person responsible for the offence may be imprisoned for up to two years.
D. Corporate Income Tax Return Form and Form for Reporting of Related Party Transactions
Effective from YA 2018, the income tax return form (i.e. Form C) includes a disclosure on whether the value of the company’s related party transactions disclosed in the audited financial statements for the financial year exceed S$15 million. If the value exceeds S$ 15 million, the taxpayer has to complete the Form for Reporting of Related Party Transactions and submit it together with Form C.
The related party transactions reporting requirement also applies to a dormant company where the value of the company’s related party transactions disclosed in the financial statements for the financial period exceeds S$15 million.
The form consists of the following relevant information that allows IRAS to better assess taxpayer’s Transfer Pricing risks and to improve the enforcement of the arm length pricing requirement:
- Particulars of Company
- Ultimate Holding Company
- Details of related party transactions
- Sales and purchases of goods
- Services income and expense
- Royalty and licence fee income and expense
- Interest income and expense
- Other income and expense
- Information on sale / purchase of goods and provision of services
- Information on loans and non-trade amounts