Asia-Pacific Transfer Pricing Handbook

Chapter Twenty-Six

Singapore Transfer Pricing Guidelines

The Inland Revenue Authority of Singapore (IRAS) issued an IRAS Circular, The Transfer Pricing Guidelines, on February 23, 2006. The guidelines themselves are 38 pages in length, and emanate from long-standing provisions in the Singapore tax law.1 The guidelines themselves are cohesive and comprehensive but they are brief, touching on many salient transfer pricing issues. Nevertheless, these guidelines do not address many of the arcane issues in which the U.S. tax authorities and its trading partners are now enmeshed. As we shall see, however, the guidelines fail to flesh out certain facets of the cost plus method and to consider practical database issues impacting comparables for the residual profit split method.

The IRAS conceptualizes the presence of “independent commercial prices,” and views the lack of independence between related parties as potentially leading to the setting of prices that deviate from these independent commercial prices. The IRAS abides by the arm’s length principle and believes that this arm’s length principle is the most appropriate standard to determine transfer prices of related parties. Nevertheless, the IRAS recognizes that tax authorities worldwide are stepping up their audit efforts to verify compliance with the arm’s length principle.

Transfer pricing provisions in Singapore depend on the presence of related parties. The IRAS’s Section 2.2 speaks of control as the determinant of related party ...