What is Transfer Pricing?
Transfer pricing refers to the prices set for transactions between related parties — for example, between a Singapore parent company and its overseas subsidiary. Singapore follows the OECD Transfer Pricing Guidelines and requires that all related-party transactions be conducted at arm’s length — meaning at the same price that would be agreed between unrelated parties.
Who Does Transfer Pricing Apply To?
Transfer pricing rules apply to Singapore companies that:
- Have related-party transactions (e.g., with parent company, subsidiaries, or associated companies)
- Engage in cross-border transactions with related parties
- Have domestic related-party transactions exceeding certain thresholds
Singapore Transfer Pricing Documentation Requirements
Companies must prepare contemporaneous transfer pricing documentation if their related-party transactions exceed:
- S$15 million in a financial year for any category of transaction
- Any threshold for loans and services if between related parties
Documentation must be prepared before filing the corporate tax return and kept for at least 5 years.
What Must the Documentation Include?
- Description of the group and related parties involved
- Details of the controlled transactions
- Transfer pricing method used and why it was selected
- Comparability analysis and benchmarking study
- Financial information supporting the arm’s length price
IRAS Advance Pricing Arrangements (APA)
To reduce transfer pricing disputes, Singapore companies can apply for an Advance Pricing Arrangement (APA) with IRAS — a binding agreement confirming the appropriate transfer pricing method in advance. APAs provide certainty for up to 5 years.
Penalties for Non-Compliance
IRAS can surcharge up to 5% of the transfer pricing adjustment if a taxpayer fails to maintain required documentation. Additional penalties apply for fraudulent arrangements.
Common Transfer Pricing Methods
- Comparable Uncontrolled Price (CUP)
- Cost Plus Method
- Resale Price Method
- Transactional Net Margin Method (TNMM)
- Profit Split Method
Need help with transfer pricing documentation or compliance? Contact Halynce Advisory — our team specialises in Singapore transfer pricing requirements.