On January 12, 2016 the Inland Revenue Authority of Singapore (IRAS) released the fourth edition of its Transfer Pricing Guidelines. Several amendments, updates and additions have been made in comparision to the prvious (third) edition.
According to IRAS the aim of the Guidelines is to provide taxpayers with guidance on transfer pricing relating to:
(a) Applying the arm’s length principle when transacting with their related parties;
(b) Applying the arm’s length principle for specific transactions, like related party services and loans;
(c) Maintaining transfer pricing documentation; and
(d) Facilities provided under tax treaties to resolve transfer pricing disputes.
The Guidelines furthermore explain IRAS’ transfer pricing compliance programme and position regarding various transfer pricing matters.
The fourth edition of the Transfer Pricing Guidelines discuss a.o. the following topics:
· A glossary providing a high level explanation of 35 terms
· PART I – TRANSFER PRICING PRINCIPLES AND FUNDAMENTALS
o General Background information
o The arm’s length principle
§ Introduction
§ What the arm’s length principle is
§ Basis for the arm’s length principle
§ Reasons for endorsing the arm’s length principle
§ Guiding principles on applying the arm’s length principle
§ Three-step approach to apply the arm’s length principle
o Transfer pricing documentation
§ Introduction
§ Objectives of preparing transfer pricing documentation
§ What contemporaneous TP documentation means
§ Types of TP documentation
§ Extent of TP documentation
§ Compliance matters relating to TP documentation
· PART II – TRANSFER PRICING ADMINISTRATION
o IRAS’ transfer pricing consultation programme
§ Introduction
§ Objectives of TPC
§ Selection of taxpayers for TPC
§ Description of TPC process
o Avoiding and resolving transfer pricing disputes
§ Introduction
§ At a glance – Dispute resolution through IRAS
§ What is MAP?
§ What is an APA?
§ What is the period for an APA?
§ Who can apply for MAP or APA?
§ When to apply for MAP and/ or APAs?
§ How to apply for MAP and/ or APAs?
§ What are the benefits of seeking MAP and/ or APAs?
§ Understanding expectations and obligations
§ Discontinuation of MAP and APAs
§ Other compliance matters
o Guidance on MAP process
o Guidance on APA process
§ APA process
§ Renewal of an APA
· PART III – OTHER ISSUES
o Adjustments relating to transfer pricing
§ Introduction
§ Types of adjustments relating to transfer pricing
§ At a glance – IRAS’ position
§ Year-end adjustments at year-end closing of accounts
§ Compensating adjustments
§ Self-initiated retrospective adjustments
§ Corresponding adjustments arising from transfer pricing adjustments by tax authorities
o Related party services
§ Introduction
§ Using the “benefits test” to determine the provision of related party services
§ Application of the arm’s length principle to determine arm’s length fee
§ Administrative practices for routine support services
§ Summary on related party services
o Related party loans
§ Application of the arm’s length principle to related party loans
§ Determination of the arm’s length interest
§ Administrative practice for indicative margins on related party loans
o Attribution of profit to permanent establishment
Furthermore there are 3 annexes included in the Guidelines:
· ANNEX A – Examples on transfer pricing methodology
· ANNEX B – Samples and guides for MAP and APA process
· ANNEX C – Routine support services commonly provided on an intragroup basis
Click here to be forwarded to the fourt edition of the IRAS e-Tax Guide: “Transfer Pricing Guidelines” as released by IRAS on January 12, 2017.
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