What is Transfer Pricing?
Territorial expansion of businesses that followed after globalization, has led to an increase in intracompany transactions and cross border transactions between related companies. For instance, while manufacturing activities are managed by an entity of a larger group in one country, marketing of the manufactured products in another country is being handled by a different subsidiary belonging to the same group. In such cases, the Transfer Pricing mechanism determines the price of the goods, services, funds, rights or intangible assets that are thus transferred for sale or consumption to a related entity.
Transfer pricing is the pricing of goods, services, and intangibles between related parties. The arm’s length principle should be adopted for transfer pricing between related parties. Taxpayers should prepare and keep contemporaneous transfer pricing documentation to show that their related party transactions are conducted at arm’s length.
What is the Transfer Pricing Regime?
Mandatory ‘Section 34F Transfer Pricing Documentation’ applicable from Year of Assessment (YA) 2019 based on certain conditions. Penalty introduced for non-compliance.
Transfer Pricing Regime in Singapore – Beginning of a New Chapter
What is in it for the businesses?
- Transfer Pricing policies to be in place
- Related party transactions to be recorded accurately
- Arm’s length principle to be followed for related party transactions
- Back-up evidence/ documents to support adherence to arm’s length principle
- Transfer Pricing documentation to be prepared and maintained on a contemporaneous basis by the due date
- Reporting of related party transactions in the prescribed form
- The possibility of an enquiry from the IRAS regarding related party transactions
Our Services for Transfer Pricing
Transfer Pricing Documentation IRAS
- Assistance in reviewing the existing Transfer Pricing policies and the supporting documentation
- Recommending changes to the Transfer Pricing policies keeping in view the local rules and regulations/ OECD Guidelines
- Preparation of Section 34F Transfer Pricing documentation
Tax Controversy and dispute resolution
- Assistance in reviewing the existing Transfer Pricing policies and the supporting documentation
- Recommending changes to the Transfer Pricing policies keeping in view the local rules and regulations/ OECD Guidelines
- Preparation of Section 34F Transfer Pricing documentation
Transfer Pricing Policy Advisory
- Review of inter-company agreements to ensure that they are drafted in accordance with the generally accepted Transfer Pricing guidelines and supported by appropriate price-setting (arm’s length price) documentation
- Royalty benchmarking (including benefit analysis) to determine an appropriate return that can be attributed to the owner of intangibles in the Group
- Management charges documentation covering the benefits analysis and appropriate cost allocation methodology
FAQs
- In 2018, the IRAS made it mandatory for a Singapore Company to prepare Transfer Pricing Documentation. A new section i.e. Section 34F was inserted in the Income Tax Act and is applicable from year of assessment 2019 and every subsequent year of assessment.
- Contemporaneous Transfer Pricing Documentation refers to documentation and information that taxpayers have relied upon to determine the pricing of a related party transaction, prior to or at the time of undertaking the transactions with related parties.
The IRAS also accepts Transfer Pricing Documentation as contemporaneous when it has been prepared not later than the due date of filing of the annual tax return for the financial year in which the transactions took place.
- Transfer Pricing Documentation has to be place before the due date for filing the annual tax return.
- The arm’s-length principle of transfer pricing states that the amount charged by one related party to another for a given product must be the same as if the parties were not related. An arm’s-length price for a transaction is therefore what the price of that transaction would be on the open market.
Transfer Pricing Made Easier
We conduct transfer pricing analysis in an efficient, user-friendly workflow.
