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Singapore – Transfer Pricing (2025)

Singapore’s domestic transfer pricing framework requires taxpayers to comply with the arm’s length principle, which is provided under Section 34D of the Income Tax Act 1947. Failure to comply may lead to a surcharge equal to 5% of the transfer pricing adjustment made by the Comptroller, pursuant to Section 34E of the Income Tax Act 1947. The domestic framework consists of the Income Tax Act 1947, the Income Tax (Transfer Pricing Documentation) Rules 2018 governing the preparation of transfer pricing documentation, and the Singapore Transfer Pricing Guidelines, including special-topic guidance on centralised activities in multinational enterprise groups. These materials are supplemented by IRAS-published guidance and administrative practice.

Arm’s length principle and the role of the OECD Guidelines

Singapore generally follows the OECD Transfer Pricing Guidelines. The Singapore Transfer Pricing Guidelines largely mirror the key principles of the OECD Guidelines and clarify how taxpayers should comply with the arm’s length principle and documentation obligations. The Guidelines also set out procedural expectations for Advance Pricing Arrangements (APAs) and Mutual Agreement Procedures (MAP), provide simplification measures such as a 5% cost mark-up for routine support services and indicative margins for related-party loans published by IRAS, and explain the circumstances under which year-end true-up adjustments are acceptable.

“Related party” is defined in Section 2 of the Income Tax Act 1947 as: “Related party, in relation to a person (A), means any person — (a) who directly or indirectly controls A; (b) who is being controlled directly or indirectly by A; or (c) who, together with A, is directly or indirectly under the control of a common person.” “Person” includes a company, body of persons and a Hindu joint family. The statute does not define “control” nor provide specific ownership thresholds for determining related-party status; therefore, control is assessed on the facts and circumstances, as reflected in administrative guidance in the Singapore Transfer Pricing Guidelines.

Methods and criteria for application

While the domestic tax law does not list transfer pricing methods, Section 5 of the Singapore Transfer Pricing Guidelines sets out the methods taxpayers may use and follows the OECD methods. The Guidelines accept comparable uncontrolled price (CUP), resale price, cost plus, transactional net margin method (TNMM), profit split and allow other methods or combinations where more appropriate. Singapore adopts the “most appropriate method” approach for selecting the method, consistent with the OECD approach; there is no statutory hierarchical ordering of methods.

Comparability and ranges

The Singapore Transfer Pricing Guidelines (Section 5) address comparability analysis in line with Chapter III of the OECD Guidelines. There is a clear domestic preference for local comparables: taxpayers should use local comparables where possible and may expand to regional comparables only when reliable local comparables are insufficient; the basis for choosing comparables must be documented. The use of secret comparables is not permitted. Regarding ranges and statistical measures, Singapore accepts the use of ranges. The Guidelines state that a wide range may indicate comparability problems; if comparability adjustments cannot be made, outliers such as minimum and maximum observations should be excluded and the interquartile range applied to determine arm’s length remuneration. A full range (minimum to maximum) may be acceptable only where all observations are demonstrably equally reliable, for example under a CUP analysis. Comparability adjustments are not mandatory unless they improve the reliability of comparables and can be made reasonably accurately.

Documentation and reporting

Singapore has implemented the three-tiered documentation approach: master file, local file and country-by-country report (CbCR). Transfer pricing documentation requirements are set out in Section 34F of the Income Tax Act 1947, the Income Tax (Transfer Pricing Documentation) Rules 2018 and Section 6 of the Singapore Transfer Pricing Guidelines. Taxpayers with gross revenue from trade or business exceeding SGD 10 million are required to prepare transfer pricing documentation unless an exemption applies. The required content at entity and group levels is largely consistent with the OECD master file and local file annexes. CbCR obligations are provided under Part 20B of the Income Tax Act 1947 and the Income Tax (International Tax Compliance Agreements) (Country-By-Country Reporting) Regulations 2018.

Documentation must be prepared in English (or translated into English) no later than the time for making the tax return for the financial year in which the transactions occur, must be provided to IRAS within 30 days of request, and must be retained for at least five years from the year in which the transactions took place. Documentation prepared for other jurisdictions (for instance OECD master file/local file) may be used for Singapore compliance if relevant. IRAS publishes e-Tax Guides to assist taxpayers with CbCR and other submission processes.

Safe harbours, exemptions and materiality

Singapore provides various simplification measures and safe harbours. Taxpayers may apply a 5% cost mark-up for routine support services where conditions in the Income Tax (Transfer Pricing Documentation) Rules 2018 and Section 14 of the Singapore Transfer Pricing Guidelines are met: services must be on the prescribed list of routine support services, the provider must not supply the same routine support services to unrelated parties, and all direct, indirect and operating costs must be included when computing the 5% cost mark-up. If the service is not on the prescribed list, taxpayers may apply the OECD simplified approach (5% profit mark-up) provided the service meets the OECD definition of low value-adding intra-group services, is not excluded by the OECD list, the counterparty’s tax authority has similarly adopted the OECD approach, the provider does not offer the same service to unrelated parties, and all relevant costs are included.

Other simplifications include an IRAS-published indicative margin for deriving interest rates on related-party loans (taxpayers add the indicative margin to an appropriate base reference rate), no cost mark-up for cost-pooling arrangements subject to specific conditions (each participant contributes cash or monetary contributions; services are not provided to unrelated parties; the costs of providing services do not exceed 15% of the service provider’s total expenses; services are on the prescribed list; and documentation exists), and no mark-up for pass-through costs where the group service provider is a paying agent who does not enhance the value of the services and liabilities are assumed by related parties.

Exemptions from documentation are provided under Section 34F of the Income Tax Act 1947 and the Income Tax (Transfer Pricing Documentation) Rules 2018, and described in Section 6 of the Singapore Transfer Pricing Guidelines. Exempt transactions include: related-party domestic transactions subject to the same tax rate; related-party loans where the indicative margin is applied; routine support services where the 5% cost mark-up is applied; related-party transactions covered by an APA; and related-party transactions not exceeding certain prescribed values.

APAs and MAP; procedures and timing

To prevent and resolve disputes, Singapore offers enhanced engagement/cooperative compliance programmes, APAs (unilateral, bilateral and multilateral), participation in the International Compliance Assurance Programme (ICAP), and MAP. The processes for APA and MAP applications (including who may apply, timing and procedural steps) are described in Sections 10 to 12 of the Singapore Transfer Pricing Guidelines and in Singapore’s MAP profile. Typically an APA covers three to five future financial years (“covered period”) and may include up to two prior years as “roll-back years” where facts and circumstances align; unilateral APAs do not permit roll-back. Singapore has participated in ICAP since 2021 to provide taxpayers with greater certainty.

Penalties and other considerations

Section 34F of the Income Tax Act 1947 prescribes penalties for non-compliance with documentation requirements: failure to comply may result in a fine not exceeding SGD 10,000. CbCR non-compliance carries penalties under Section 105M of the Income Tax Act 1947, with amounts varying by the offence. The statute of limitations for assessments to raise additional tax is four years (Section 74 of the Income Tax Act 1947); there is no limitation for assessments to discharge or reduce tax or where fraud or wilful default has been committed. The four-year limitation does not apply to assessments needed to give effect to corresponding adjustments agreed under a MAP (Section 74(2A)).

Singapore does not permit unilateral downward corresponding adjustments in the absence of a MAP (Singapore Transfer Pricing Guidelines, Section 13). Year-end adjustments are allowed provided taxpayers maintain contemporaneous transfer pricing analyses and documentation establishing the arm’s length prices, make symmetrical adjustments across affected related parties to avoid double taxation or double non-taxation, and make adjustments before filing tax returns (Section 13 of the Singapore Transfer Pricing Guidelines). The domestic framework does not provide for mandatory secondary adjustments in the profile provided.

Attribution of profits to permanent establishments

Singapore’s tax treaties contain Article 7 as it read before 2010. Singapore does not apply the Authorized OECD Approach (AOA). For attribution to permanent establishments (PEs), Singapore applies the treaty wording and the basic principle that profits attributable to a PE are those the PE would have earned if it were a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions, using the 2018 OECD Additional Guidance on the Attribution of Profits to Permanent Establishments together with Singapore and OECD transfer pricing guidelines. Where activities performed by a taxpayer in Singapore create a PE for a foreign related party, Singapore will not attribute additional profits to the PE provided the tax resident in Singapore receives arm’s length remuneration commensurate with functions performed, assets used and risks assumed, the remuneration is supported by contemporaneous documentation, and the foreign related party does not perform functions, use assets or assume risks in Singapore beyond those arising from the activities of the taxpayer.

Conclusion

Singapore’s transfer pricing regime is anchored in domestic statute (Income Tax Act 1947) and administrative rules, and is heavily informed by OECD practice. It combines clear documentation obligations for larger taxpayers (SGD 10 million gross revenue threshold), pragmatic simplification measures (5% cost mark-up, indicative loan margins, cost-pooling and pass-through cost rules), and dispute prevention mechanisms (APAs, MAP, ICAP). Method selection follows the “most appropriate method” standard, comparability analysis favours local comparables and prescribes statistical treatment of outliers, and the law sets out enforcement, penalties and limitation rules (Sections 34D, 34E, 34F, 74 and 105M) that give juridical certainty to the processes described in the Singapore Transfer Pricing Guidelines.

References

For further information and the country profile repository, see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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