Contributed by Complete Corporate Services

On 10 August 2021, the IRAS released the sixth edition of the Singapore TP Guidelines (“Sixth Edition TPG”), updating and replacing the previous version released in February 2018. The Sixth Edition TPG takes into account some of the key contents from OECD Transfer Pricing Guidelines as well as presents an opportunity for taxpayers to revisit their transfer pricing policy and documentation to ensure they are in alignment with the IRAS TP compliance requirements.

We highlight the key updates mentioned in the Sixth Edition TPG:

Remission of TP surcharges

  • Introduced partial/full remission on 1) TP adjustments made by IRAS or 2) self-initiated retrospective upward adjustments, subject to certain conditions such as cooperation during the audit, maintenance of contemporaneous TP Documentation and good tax compliance records.
  • Full remission may be granted to taxpayers who make self-initiated retrospective upward adjustments within two years from tax filing due date, before the receipt of IRAS’ query, audit or investigation, in addition to meeting other conditions.


 Additional guidance on financial transactions

  • (a) Expanded guidance on related party loans and introduced guidance on other financial transactions such as cash pooling, hedging, financial guarantees and captive insurance; and (b) whether the purported loan should be regarded as a loan or some other kind of payment (e.g., contribution to equity capital).
  • IRAS has explicitly taken a position that interest-free related party loans will not be regarded as arm’s length unless taxpayers have reliable evidence that independent parties under comparable circumstances would similarly provide loans without charging any interest.
  • For comparability analysis purposes, the Sixth Edition TPG reiterates that generally bank opinions are not regarded as evidence of arm’s length terms and conditions as they do not reflect actual transactions.


Intra-Group Services

  • Provides taxpayers with an additional option to apply the 5% profit mark-up, for certain low value adding intra-group services not covered under the current administrative concession (i.e. Annex C of the Sixth Edition TPG), under the OECD simplified approach, subject to certain conditions. The main one of the aforesaid conditions is that the tax authority of the related counterparty must have similarly adopted the OECD simplified approach. Taxpayers relying on the OECD simplified approach are nonetheless still required to prepare TP Documentation documenting the application of the OECD simplified approach.
  • Clarifies the treatment of costs relating to general shareholder activities and shareholder activities carried out by a group member on behalf of a holding company, with the latter being regarded as the provision of a service that warrants compensation by the holding company.


Cost Contribution Arrangement (“CCA”)

  • Sets out a four-step framework for the application of the arm’s length principle to a CCA.
  • Guidance is also provided on the tax treatment for various payments or adjustments made pursuant to a CCA for TP and income tax purposes, and the types of documentation that should be maintained.


As a part of this update, IRAS has officially renamed Transfer Pricing Consultation to Transfer Pricing Audit which indicates IRAS’ “aggressive investigative” approach in ensuring and enforcing stringent TP compliance requirements amongst taxpayers. To better manage TP risks and to mitigate the surcharge implications, the IRAS encourages taxpayers to prepare contemporaneous TP Documentation, even if they may not be required to do so.

Taxpayers should consider the newly introduced guidance/clarifications and review their existing TP Documentation as well as TP analysis as part of their yearly TP compliance in anticipation of increased scrutiny from IRAS.

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!