All you need to know about Singapore Transfer Pricing Documentation Requirements

Companies with related party transactions are responsible for complying with the transfer pricing provision in Singapore. The transfer pricing provisions in Singapore (and other countries) are part of the income tax act, and their objective is to enforce compliance with the arm’s length principle. They operate as a separate mechanism (in addition to the tax rules) to limit the deductible expenses or control the underestimation of assessable income.

Simply put, a tax computation can be correct under Singapore Tax rules. However, suppose some items of the tax computation are associated with transactions with related parties (e.g. payments received or paid to related parties).

In that case, the company needs to ensure that those items are correctly calculated following Singapore’s transfer pricing regulations.

In addition to Singapore tax return, companies with related party transactions have the following additional compliance requirements:

1. Preparation of related party form that is submitted with the corporate tax return. The objective of this form is to report to the Singapore tax authority (IRAS) the type of related party transactions and their values during the financial year. After the form is submitted to IRAS, the tax authority will use this information to conduct transfer pricing audits to ensure that companies comply with the transfer pricing regulations in Singapore.
2. Preparation of transfer pricing documentation required to provide evidence of compliance with Singapore transfer pricing provisions. Transfer pricing documentation is critical to proving that the items of the tax computation associated with related party transactions are calculated correctly. It is also important to remember that the taxpayer is responsible for verifying that the price agreed in a related party transaction is at arm’s length (also known as a market price). The tax authority expects the taxpayer to prove that a market price is agreed upon by preparing the transfer pricing documentation for every financial year.
3. Depending on the company's circumstances, the transfer pricing documentation must include both a master file and a local file. Singapore requires all taxpayers to have a two-tiered analysis in their transfer pricing documentation, i.e. 1) Group Analysis (also known under OECD as Master File) 2) Entity Analysis (also known under OECD as Local File).
4. Singapore has also implemented a country-by-country report, a separate reporting requirement for companies with consolidated revenue above SG$1.1 billion during the preceding financial year.

The above compliance requirements are due 30 November 2022. Country by country report is due 12 months after the financial year-end. E.g. 31 December 2021 year-end are due to lodge country by country reporting by 31 December 2022.