Do you believe that your business is already in compliance with the Singapore TP requirements? If so, are your answers to the following questions positive? If not, what do you have to do? We highlight 5 critical areas from a Singapore TP perspective below, to do a self-test.
QUESTION 1: ARE YOU AWARE OF THE EXISTENCE OF THE RPT FORM?
A company filing the corporate income tax return (i.e. Form C) must complete the RPT Form, if the value of RPT disclosed in the financial statements (“FS”) for the financial period concerned, exceeds S$15m.
The IRAS often raise queries surrounding the discrepancy between the RPTs reflected in the FS and those reported in the RPT Form. If there exists any discrepancies due to different interpretations between accounting vs tax, ensure that you have sufficient documentation in place!
QUESTION 2: THINK YOU ARE DONE WITH THE CONTEMPORANEOUS TP DOCUMENTATION ("TPD") REQUIREMENT? MAYBE NOT!
A common misconception of businesses are that the TPD would automatically free them of further TPD requirements for at least 3 financial periods. Half right! Although the IRAS has allowed businesses to use past TPDs to support its RPTs in the concerned financial period to reduce compliance burden, note that the e-Tax guide has also explicitly mention that TPDs will have to be reviewed and updated annually, prior to applying the said concession to your RPTs.
Essentially, businesses should assess whether there have been changes towards their RPTs such as the pricing, business and economic conditions, etc in the concerned financial period as compared to the previous year.
QUESTION 3: DO YOU HAVE COMPREHENSIVE INTERCOMPANY AGREEMENTS IN PLACE?
Often, businesses fail to acknowledge the importance of having comprehensive intercompany agreements in place or that the existing agreement was poorly worded to the extent that it is counter-productive (i.e. work against the taxpayer). Such intercompany agreements if properly drafted to reflect the nature of the RPTs, tend to provide a proper line of defense against challenges from tax authority.
QUESTION 4: WHERE IS THE APPLICATION OF TP TOWARDS THE GOVERNMENT ASSISTANCE GIVEN DUE TO COVID-19?
As the government assistance to each sector varies, it is critical to examine the impact of such benefits received on a group basis. The government assistance received should not be passed on to related parties through inappropriate prices. To provide some context, in a cost-plus model where the taxpayer is only servicing related parties, the cost base of the taxpayer should not be reduced by such government assistance (e.g. JSS payouts) for the purpose of computing the TP charges to the service recipient party.
QUESTION 5: HOW WOULD COVID-19 IMPACT MY TP DOCUMENTATION PREPARED?
As mentioned earlier, where there have been significant changes to the economic conditions such as the COVID-19 pandemic, there exists an obligation on businesses to review its TPDs.
Businesses, especially those with operations adversely affected by the COVID-19 pandemic will need to provide additional information in its TPD to articulate the impact and substantiate the arm’s length nature of its RPTs. Adjustments made due to TP could also have an impact from indirect tax perspective.
Affirmative that you are still very much in compliance with the Singapore TP requirements? Would you be up for a tax health check if initiated by the IRAS? Or you do not know what should be your next steps? Reach out to our TP specialists at CCS for a meaningful discussion now!