IRAS’s issues e-Tax Guide “Transfer Pricing Guidelines (3rd Edition)”

7 January 2016

On 4 January 2016, the Inland Revenue Authority of Singapore (IRAS) issued the third edition of the e-Tax Guide, “Transfer Pricing Guidelines”.

Transfer pricing (TP) concerns the prices charged in transactions between related parties. Generally, a transaction between two unrelated parties will be conducted at a price approximating to the market price for the transaction. But this may not necessarily be the case when two related parties transact with each other.

To prevent price distortion, tax authorities may audit the prices of transactions between related parties to verify if they are reflective of market prices. Such audit can lead to transfer pricing adjustments bringing about double taxation.

To reduce the risks of audits and double taxation, taxpayers transacting with their related parties should apply the internationally endorsed arm’s length principle – that the transfer price between them should be an arm’s length price as if they were unrelated parties negotiating in a normal market. Taxpayers should also maintain proper transfer pricing documentation to demonstrate that the pricing is arm’s length.

If taxpayers are faced with double taxation, they may apply for a Mutual Agreement Procedure (MAP) with their tax authorities under the tax treaty provisions to eliminate double taxation. They may also apply for an Advance Pricing Arrangement (APA) to agree in advance with one or more tax authorities the appropriate transfer pricing for their related party transactions for a period of time.

The Guide explains IRAS’ transfer pricing compliance programme and position regarding various transfer pricing matters and provides taxpayers with guidance on transfer pricing relating to:

  • The application of the arm’s length principle when transacting with their related parties.
  • The application of the arm’s length principle for specific transactions, like related party services and loans.
  • Maintenance of transfer pricing documentation; and
  • Facilities provided under tax treaties to resolve transfer pricing disputes.

Summary of changes made in this edition of the e-Tax Guide are as follows:

  1. Enhancement on the guidance on the cost plus method, resulting in the amendment of paragraphs 5.53, 5.54 and 5.56 to 5.58.
  1. Enhancement of the MAP and APA process, resulting in the amendment of the relevant paragraphs in sections 8 to 10 as follows:
  • Replacement of the general rule regarding when a financial year is considered a roll-back year in paragraph 8.19 with examples on the APA period and roll-back years.
  • Addition of a sentence at the end of paragraph 8.29, that IRAS is not precluded from conducting an audit on the taxpayer if there is non-compliance with the Singapore tax law.
  • Amendment to the diagram on the MAP process in paragraph 9.2 for greater clarity.
  • Amendment to paragraphs 10.2, 10.5 to 10.7, 10.10, 10.15 and 10.16 to reflect the enhanced APA process.
  • Rearrangement and amendment to the items in Annex B2 to reflect the changes in paragraph 10.5.
  1. Other amendments:
  • Editorial amendments to paragraphs 6.9, 11.8 and 14.3(c).
  • Addition of a sentence at the end of paragraph 13.5, that taxpayer receiving a loan should likewise apply the arm’s length principle.
  • Paragraph 15.1 has been amended the removal of the International Tax Branch’s mailbox contact.

The second edition was published on 6 January 2015.

For further details, please refer to the IRAS’s website.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit for more information.