Transfer pricing refers to the prices charged for transactions between related parties – such as a Singapore company and its overseas parent, subsidiary or affiliate. Because these parties are not independent, Singapore requires such transactions to be conducted at arm's length: on terms comparable to those that unrelated parties would have agreed. This principle is set out in Section 34D of the Income Tax Act and elaborated in IRAS's Transfer Pricing Guidelines, which follow the OECD approach.
Businesses with related-party dealings generally need to price those dealings using an appropriate method – the comparable uncontrolled price, resale price, cost plus, transactional net margin or profit split method; prepare contemporaneous Transfer Pricing Documentation where they meet the thresholds (broadly, gross revenue above S$10 million, or where certain per-category transaction values are exceeded); and report related-party transactions with their tax return where required.
Getting this right matters: where pricing is not at arm's length or documentation is missing, IRAS can make transfer pricing adjustments and impose a surcharge. The questions below explain the key concepts, and Apexia can help you benchmark your related-party transactions and prepare compliant documentation.