All you need to know about Singapore Transfer Pricing Documentation Requirements

Insights • All you need to know about Singapore Transfer Pricing Documentation Requirements

Singapore Tax Season is here! Understand your compliance requirements.

The submission of corporate tax returns dateline in Singapore is around the corner, with most companies having to submit their tax return by 30 November 2022.

A common misconception is that the submission of tax return is the only compliance requirement in Singapore. Often, companies overlook transfer pricing requirements applicable to companies with related party transactions.

Is the corporate tax return (form C) the only compliance requirement during Singapore tax season?

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.

What are the transfer pricing requirements in Singapore?

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

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.
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.
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).
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.

How can we help?

Transfer Pricing Solutions is a boutique transfer pricing firm who works directly with your team, applying our experience and expertise in transfer pricing to provide, prepare, document and assist in defending your international related party transactions.

Our purpose is to make a difference in the service we provide to our clients by being practical, proactive and cost-effective.

We can assist your clients with the preparation of transfer pricing documentation, country by country (CbC) reporting, master file, comprehensive transfer pricing policy, performing global and local benchmarking comparable searches, providing training designed for CFOs and tax teams and performing transfer pricing controversy and audits.

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