Singapore: IRAS Releases The 4th Edition Of Transfer Pricing Guidelines

Last Updated: 19 January 2017
Article by Crowe Horwath First Trust

On 12 January 2017, the Inland Revenue Authority of Singapore ('IRAS') released the fourth edition of the Singapore Transfer Pricing Guidelines. The revised guidelines make explicit reference to the Base Erosion and Profit Shifting ("BEPS") Action Plans 8 – 10 Aligning Transfer Pricing Outcomes with Value Creation and Action Plan 13 Transfer Pricing Documentation, thereby demonstrating compliance with international transfer pricing standards.

The continued revision of the Singapore Transfer Pricing Guidelines also highlights the IRAS' focus on transfer pricing analyses and documentation to ensure that Singapore based corporate taxpayers are engaged in related party transactions in a manner compliant with the arm's length standard.

The key changes made in the Singapore Transfer Pricing Guidelines (4th edition) can be summarised as follows:

  1. Aligning transfer pricing outcomes with value creation

    In line with Action Plan 8 -10, the IRAS has explicitly noted that profits should be taxed where the real economic activities generating the profits are performed and where value is created. This has been a growing concern for tax authorities globally and is one of the cornerstones of the BEPS project. In recent years, foreign tax authorities such as the Australian Tax Office, have also scrutinised transactions entered by Australian taxpayers with Singapore counterparties along the same lines (i.e., is there true economic value being created in Singapore to justify the profits being booked).

    In addition, a more robust risk analysis is now required to demonstrate not only that an entity is contractually bearing risks, but also that the entity has the capacity and capability, from both a financial and operational perspective, to assume and manage the specific economically significant risks. To reflect the importance of risk in the functional analysis process, the IRAS has provided additional guidance and examples on risk analysis.

    These changes suggest that a more robust function, asset and risk ("FAR") analysis may need to be prepared in respect of Singapore's operations. Furthermore, in line with Action Plan 8 – 10, we would also recommend that a value chain analyses is carried in respect of the transactions that involves related parties in Singapore.
  2. Safe harbour provisions for intercompany loan transactions

    In an effort to reduce transfer pricing compliance costs, the IRAS has now introduced an administrative practice whereby a safe harbour interest margin can be applied for cross-border intercompany loans provided or received by a Singapore taxpayer. This is with effect from 1 January 2017, which suggests that this safe harbour provision may not apply to any loans provided or received in prior years. The interest margin, which will be published on an annual basis, can be applied on all new loans, which are below the S$15 million threshold. It should be noted that the interest rate margin needs to be applied on the selected interbank rate (i.e., LIBOR / SIBOR) in the case of floating interest rate arrangements or the swap rate in the case of fixed interest rate arrangements. In the event that a taxpayer chooses not to apply the safe harbour interest rate margin, then a transfer pricing analysis will need to be carried out to support the arm's length interest rate.

    This administrative practice is beneficial for Singapore taxpayers as it eliminates the need to prepare transfer pricing analysis. However, the interest rate margin may not be accepted by or may not be in compliance with the transfer pricing rules in foreign jurisdictions. Thus, we suggest that Singapore taxpayers adopt a holistic position, keeping in mind the transfer pricing provisions of Singapore as well as foreign jurisdictions, in terms of how the safe harbour is to be applied on intercompany loan transactions

    Paragraph 13.30 of the Transfer Pricing Guidelines suggests that with respect to loans, the IRAS will apply the threshold to each related party, individually and not in aggregate. This will make it easier to qualify for the administrative exemption explained above.
  3. Enhanced guidance on Mutual Agreement Procedures ("MAPs") and Advance Pricing Arrangements ("APAs")

    With respect to APAs, previously IRAS had indicated that the number of roll-back years will generally not exceed two financial years. The IRAS has now clarified that, depending on the facts and circumstances of each request, it may exercise its discretion to vary the number of roll-back years. Reference has also been made to Action Plan 5 - Countering Harmful Tax Practices More Effectively, taking into Account Transparency and Substance – to outline the framework by which IRAS will exchange information on unilateral APAs with foreign jurisdictions.

    Similar clarifications have also been provided for MAPs. For example, IRAS aims to resolve a MAP case within 24 months from receiving the taxpayer's complete application and it is open to considering a refund of any interest and/or penalties that may have already been imposed in a transfer pricing audit during the MAP discussions. The IRAS has also noted that any negotiation between the IRAS and the foreign competent authority may be challenging if the taxpayer has already chosen to accept the transfer pricing audit settlement with the foreign competent authority.

    Thus, with respect to both APA and MAP applications, taxpayers need to understand the procedures and limitations that such negotiations may place on both the IRAS as well as the foreign competent authorities before deciding to proceed with such strategies.

The release of Singapore Transfer Pricing Guidelines (4th edition) shows IRAS' continued focus and attention on transfer pricing and highlights the need for Singapore based corporate taxpayers to adhere to the arm's length standard. It also demonstrates IRAS' commitment to address the global issue of BEPS.

With the global implementation of the BEPS Action Plans, transfer pricing continues to receive attention across multiple jurisdictions. It is likely that many of Singapore's trading partners will be reviewing and repositioning their transfer pricing provisions in line with the global standards this year. The changes that are likely to take place will require multinational corporations to holistically review and document the related party transactions entered into by them in a consistent manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions