Transfer pricing crackdown: the Singapore perspective
As Singapore aligns itself with the global trend towards increased reporting requirements, the country is attempting to maintain a fine balance between its ‘light touch’ attitude towards transfer pricing reporting while keeping tax administration simple for the average taxpayer.
Singapore recently announced new reporting measures that will take effect in the 2018 tax year. Taxpayers will be required to report certain details of related party transactions (RPT) where the value of RPT in the audited accounts for the financial year exceeds S$15m (approximately US$10.5m). Multinationals will need to submit the ‘Form for Reporting Related Party Transactions’ together with their corporate income tax return, also known as ‘Form C’. The value of RPT is the sum of all RPT items in the income statement and the year-end balances of loans and non-trade amounts.
This marks a subtle shift from the Inland Revenue Authority of Singapore’s (IRAS) stance of maintaining a relatively light touch approach towards transfer pricing reporting which aims to enforce arm’s length principles without placing a disproportionate burden on taxpayers at large. Indeed, it signifies that the IRAS is aligning itself with the growing trend of greater scrutiny and heightened reporting requirements among an increasing number of countries on the transfer pricing front. In countries such as Malaysia and India, transfer pricing reporting for related party transactions is an integral part of their overall corporate tax filing regime.
This latest move from Singapore around transfer pricing follows on from its move last year to join the OECDbacked base erosion and profit shifting (BEPS) project. Singapore committed to adopting four minimum standards of the 15-point action plan under the BEPS project, as follows.
Action 5: Countering harmful tax practices
Under this action point, which focuses on concerns around preferential regimes, Singapore is committed to using its tax incentive framework in a judicious manner in line with rewarding economically substantive activities without risking its use as a means to facilitate artificial profit shifting.
Action 6: Preventing treaty abuse
Singapore is actively working with other countries to develop a multilateral instrument which will incorporate anti-abuse measures such as ‘limitation of benefits’ clauses for inclusion in its tax treaties.
Action 13: Transfer pricing documentation – country - by - country reporting
Singapore has committed to implementing Country-by-Country (CbC) reporting for financial years beginning on or after 1 January 2017 for multinational enterprises (MNEs) whose ultimate parent entities are in Singapore and whose group turnover exceeds S$1.125bn. These entities are required to file CbC reports within 12 months from the last day of their financial year. The CbC reports will be automatically exchanged with tax authorities of other jurisdictions that have entered into bilateral agreements with Singapore.
Action 14: Enhancing dispute resolution
Singapore is committed to working closely with other countries on the establishment of robust dispute resolution mechanisms in line with the BEPS project, to ensure taxpayers have access to such mechanisms under the bilateral treaty framework.
A balancing act
Singapore has tried to maintain a balance between enforcing global transfer pricing rules while keeping its tax administration relatively simple without unduly burdening the average taxpayer. The global scrutiny on transfer pricing and the increased reporting requirements being implemented by countries around the world undoubtedly makes the light touch approach harder to achieve. But many taxpayers in Singapore hope IRAS will continue with its pragmatic attitude towards retaining that fine balance.
For more information, contact:
Nexia TS, Singapore
T: +65 6534 5700