The Inland Revenue Authority of Singapore (IRAS) recently updated the indicative margin which taxpayers can apply on each related party loan not exceeding S$15 million provided or obtained during the period from 1 January to 31 December 2018. The indicative margin will be updated by IRAS at the start of each calendar year as shown below.
A. For related party loans not exceeding S$15 million obtained or provided during the period 1 January 2017 to 31 December 2017:
Indicative Margin: +250 bps (2.50%)
B. For related party loans not exceeding S$15 million obtained or provided during the period 1 January 2018 to 31 December 2018:
Indicative Margin: +175 bps (1.75%)
While the indicative margin is optional, it allows taxpayers an alternative to carrying out detailed transfer pricing analysis in compliance with the arm’s length principle for their related party loans.
For further information on the rules regarding the application of the indicative margin, please refer to IRAS’ Transfer Pricing Guidelines.
Source: Inland Revenue Authority of Singapore