Shaking up Singapore's transfer pricing regime

WHEN the Inland Revenue Authority of Singapore (IRAS) published the first edition of the Singapore Transfer Pricing (TP) Guidelines in 2006, it was a concise circular of just 42 pages. The overall messaging of the circular was friendly - it laid out the key transfer pricing concepts and guiding principles, recommending (but not mandating) taxpayers to prepare transfer pricing documentation to reduce the risk of double taxation.

Although the business community took notice - it was, after all, a major announcement from the IRAS - not many taxpayers viewed transfer pricing as a critical issue at the time, and did not see a pressing need to prepare the documentation since it was not mandatory.

A decade later, the Singapore TP Guidelines' fourth edition has 113 pages - almost three times the number of pages compared to the first edition. In 2017, the IRAS also introduced significant legislative amendments to the Income Tax (Amendment) Act to make transfer pricing documentation mandatory and impose penalties for non-compliance with effect from the Year of Assessment 2019. Through these actions, the IRAS has sent a clear signal that it is moving away from a guidance-based approach to a formal transfer pricing regime.