Asia-Pacific Transfer Pricing Handbook

Chapter Twenty-Seven

Singapore Transfer Pricing Guidelines for Related Party Loans and Services

The Inland Revenue Authority Of Singapore (IRAS) issued Transfer Pricing Guidelines for Related Party Loans and Related Party Services on February 23, 2009. As background, the IRAS had issued draft supplementary guidelines for related party loans and services on October 21, 2008. The draft supplementary guidelines were subject to public comment. The IRAS took these comments into account in finalizing the Transfer Pricing Guidelines for Related Party Loans and Related Party Services.

The loan guidelines and the services guidelines supplement the February 23, 2006, transfer pricing guidelines. The supplementary guideline circular addresses these issues:

• Interest-free loans
• The 5% markup on costs applied in the services context
• No-markup services provided by one service provider to another service provider

All citations, except as noted, pertain to the Transfer Pricing Guidelines for Related Party Loans and Related Party Services that the IRAS issued on February 23, 2009.

The IRAS believes that the arm’s length principle is the “most appropriate standard” to determine the transfer prices for related party transactions.1 As such, the IRAS abides by this arm’s length principle. The IRAS recognizes that the arm’s length principle should apply to all related party transactions. Nevertheless, despite this affirmation of the arm’s length principle, the IRAS recognizes that “a mechanical application” ...