Transfer pricing refers to the pricing of transactions between related parties (e.g. subsidiaries, parent companies, affiliated entities). It is important because tax authorities like IRAS require these transactions to be conducted at arm’s length, i.e., the price must reflect what independent parties would agree to. Incorrect or undocumented pricing can lead to tax adjustments, penalties, or double taxation.

Yes. Under Section 34F of the Singapore Income Tax Act, companies are required to prepare Transfer Pricing Documentation (TPD) if:

• Their gross revenue exceeds S$10 million, or

• The total value of related-party transactions exceeds S$15 million in any category (e.g. goods, services, IP).

Even if you are not mandated, preparing TPD is highly recommended to mitigate audit risk and support pricing policies.

If you fail to prepare contemporaneous and complete documentation, IRAS may impose a surcharge of 5% on any transfer pricing adjustment, regardless of intent. Lack of documentation also weakens your audit defence position and may lead to longer disputes or potential double taxation.

According to IRAS and OECD guidelines, TPD should include:

• Organisational structure and group overview

• Functional analysis (Functions–Assets–Risks)

• Industry and economic context

• Details of related-party transactions

• Transfer pricing method(s) used and justification

• Benchmarking analysis (if applicable)

We ensure all required elements are documented in line with IRAS’s 7th Edition TP Guidelines (2024).

IRAS accepts five methods consistent with OECD rules:

• Comparable Uncontrolled Price (CUP)

• Resale Price Method

• Cost Plus Method

• Transactional Net Margin Method (TNMM)

• Profit Split Method

We help you determine the most appropriate method based on your transaction type and business model.

Yes, for certain types of transactions (especially services, financing, IP licensing), IRAS expects you to support pricing using independent third-party comparables. Our team prepares benchmarking studies using reputable databases and global comparables in line with IRAS expectations.

Absolutely. We provide TP audit defence, including preparing clarification letters, revising documentation, engaging in IRAS correspondence, and negotiating penalty mitigation or surcharge remission where applicable.

TPD should be updated annually, especially if there are:

• New or modified related-party transactions

• Changes in business model or group structure

• Significant economic or industry shifts

Benchmarking studies are typically refreshed every 3 years, with financial updates annually.

Yes. Even domestic transactions (e.g., loans or services between Singapore entities) must adhere to the arm’s length principle, especially from 1 Jan 2025 when IRAS starts enforcing indicative interest rate guidelines on related-party domestic loans.