Transfer pricing has been a big focus and a concern for multinationals in Singapore in the past year. Reflecting the developing global standards recommended by the BEPS project, the Singapore transfer pricing regime has experienced significant changes and reforms in the past few years. The Singapore TP rules were updated in 2015 and 2016 with new documentation requirements as well as access to formal advance pricing agreements (APA) and mutual agreement procedure (MAP) programmes.
"To assist taxpayers in coping with the changes, the authorities in Singapore have taken an approach of close engagement and consultation with affected taxpayers and the professional community. It is also clear that the Inland Revenue Authority of Singapore has really ramped up enforcement of its TP regime, including a marked increase in transfer pricing consultations, where they evaluate how businesses establish and implement their TP policies and manage their compliance," said Mike Nixon, director of economics at Baker & McKenzie.Wong & Leow.
Singapore has committed to adopt the four minimum standards under the BEPS project, which are the adoption of Action 5 on harmful tax practices, Action 6 on treaty abuse, Action 13 on country-by-country reporting (CbCR), and Action 14 on dispute resolution. The common reporting standard will also be implemented with effect from January 1 2017 and automatic exchange of information will commence in 2018.
On June 16 2016, the Ministry of Finance announced that Singapore will implement CbCR for fiscal years beginning on or after January 1 2017 for Singapore-headquartered multinationals. Specific guidelines are expected to be released in September 2016.
"This move reinforces Singapore's commitment to the BEPS Project, which is important in maintaining Singapore as an attractive business location and a jurisdiction which does not tolerate treaty abuse or tax evasion," said Low Hwee Chua, regional managing partner of Deloitte.
The transfer pricing industry is expecting more TP related regulation updates on top of more stringent administration by the authorities. "There is a notable increase in clients' interest in assessing and conducting 'health checks' on the readiness of existing tax models and structures in the post-BEPS environment," said See Jee Chang, head of transfer pricing at Deloitte.
Furthermore, there is a strong level of interest in APAs, as more taxpayers are willing to invest in APAs for certainty given the anticipated harsher tax audit environment. "We also observed an increasing amount of audit activities in Singapore, from transfer pricing-related questions in the routine query process, to full-blown transfer pricing consultation process, akin to a more in-depth field audit," said Geoffrey Soh, head of transfer pricing at KPMG.
"It is more important than ever for multinationals to be prepared," Soh added. To start with, he advised multinationals to review current transfer pricing policies, evaluate the competence of existing TP documentation, plan how to prepare a consistent and systematic TP document, and prepare for CbCR compliance by conducting "dry runs" to assess readiness and how it ties in with the overall TP position. He also urges companies to consider proactive measures such as APA, and conducting a BEPS health check on existing related party transactions.
Inland Revenue Authority of Singapore (IRAS)
55 Newton Road, Revenue House, Singapore 307987
Tel: +65 6356 8622
Fax: +65 6351 4360
Website: www.iras.gov.sg/IRASHome/Businesses/Companies/ and www.iras.gov.sg/IRASHome/GST/GST-registered-businesses/
(As of January 1 2016)
|Corporate income tax rate||17% (a)|
|Capital gains tax rate||0%|
|Branch tax rate||17% (a)|
Withholding tax (b)
|Royalties from patents, know-how, etc.||10% (b)|
|Branch remittance tax||0%|
Net operating losses (years)
Source: EY 2016 Worldwide Corporate Tax Guide
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