Asia-Pacific Transfer Pricing Handbook

Chapter Thirty-Six

Shared Services and Cost Pooling Arrangements in the United States and Singapore

Governments Are increasing the requirements they impose on multinational taxpayers as to the allocation of services, whether these services take place inside or outside the specific governmental jurisdiction. As a result, a multinational taxpayer, on a practical basis, may need to address the treatment of a myriad number of its service costs to fulfill the compliance objectives that tax collectors impose. The taxpayer might face an uncertain future when it comes to the allocation of services costs and its need to develop complex calculations to fulfill government objectives.

Without more, such a multinational taxpayer faces the need to apply various service cost methodologies, making that determination in a plethora of circumstances. Both the Internal Revenue Service (IRS) in the United States and the Inland Revenue Authority of Singapore (IRAS) in Singapore have begun to address these transfer pricing services issues. The IRS, in recognizing these transfer pricing services concerns, permits taxpayers to set up and utilize shared services arrangements. However, as we shall see, the IRS then curtails the shared services arrangement (SSA) process, limiting the salutary benefits the SSA provides. In contrast, the Singapore provisions do not impose these cost pooling limitations.

This analysis addresses the SSA process in the United States and the cost pooling process in Singapore in ...