Transfer Pricing Guidelines for Headquarters in Singapore

BlogTransfer Pricing Guidelines for Headquarters in Singapore

New Transfer Pricing Guidelines for Headquarters in Singapore.


Situated at the heart of Asia, Singapore is often a preferred location for setting up headquarters (HQ) due to the presence of key attributes that are essential for HQ activities. Singapore ranks amongst the top in the world in terms of a competitive economy and ease of doing business.

In addition, Singapore’s strategic location, vibrant innovation ecosystem, strong talent base and established infrastructure present a unique combination of factors that allow a Singapore-based HQ to host a range of business activities.



IRAS is aware that Singapore HQs add significant value to Multinational Groups as an strategic place for entering into business in Asia. For this reason, many MNE groups are increasingly leveraging Singapore as a home to centralise key decision-making, management and coordination, build customer insights and develop product and services strategies for local markets. In turn, Singapore-base HQs have deepened capabilities and broadened their networks to support business, innovation and talent needs.

A key aspect from Singapore transfer pricing perspective is that the entities that perform the role of headquarter in Singapore should be compensated with a fair share of profit and  Singaporean HQs should pay their fair share of tax. In many occasions, the profit allocation of the Singaporean HQs is compromised as the general perception is that Tax Authorities of surrounding countries in South East Asia tend to be aggressive when challenging the price of intercompany transactions specially when the counterparty is located in Singapore. 

Following this, the Inland Revenue Authority of Singapore (“IRAS”) released an e-Tax guide on centralised activities in multinational enterprise (“MNE”) groups focussing on the economic value contributions of centralised activities in Singapore and their importance to MNE Groups. Ultimately, IRAS is also prepared to ensure that Singapore HQs abide to the arm's length principle and are compensated with the fair share of profits.

Highlights

Functions

The four main activities undertaken by a HQ are provided in the table below:

 
Principal in distribution, manufacturing or research and development arrangements
Activities relating to core business processes
Activities relating to administrative, technical, financial, commercial, management, coordination and control functions
Shareholder activities
Nature of activity
Risk taking and decision making
Core business processes with respect to supply chain of goods and/or services
Routine centralised services
 
Activities relating to other group entities that are performed from the perspective of a shareholder
Level of expertise and skills
High
Medium
Low
N/A
Objective
Meet group level commercial objectives and performance
Improve the overall performance of group
Support the smooth running of the group entities
 
Compliance with regulation
Provides benefit to group entities
Yes
Yes
Yes
No
Return/
compensation
Service charge
Service charge
Service charge
No charge

Assets

The assets utilised by the HQ are as follows:

Assets
Principal
Centralised service provider
Intangible properties
Yes
No
Operating premise
Yes
Yes
Fixtures and equipment
Yes
Yes
Raw materials, packaging materials and finished goods
Yes (for manufacturing MNE)
No


 

Questions?

    We'd love to chat further. Please get in touch to discuss how Transfer Pricing Solutions Asia can assist. 

    T: +65 31585806
    E: services@transferpricingsolutions.asia

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