Singapore

Market overview

If you judge a country by its tax authority, then you could say that Singapore takes the BEPS action plan seriously. Singapore's tax authority, the Inland Revenue Authority of Singapore (IRAS), has placed MNEs with operations in the country under far greater scrutiny since the release of the OECD's 15 BEPS action points in 2015, leading to more TP-related audits.

The increase in audits is leading to increased disputes between the IRAS and taxpayers in Singapore, according to advisers. Sowmya Varadharajan, head of transfer pricing at IC Advisors, said that Singapore has a low tax rate and this has emphasised the importance of transfer pricing.

"There is a need to find a position between compliance or documentation rules and being a country with a low tax rate," said Varadharajan. "There is a constant struggle between compliance with the global standard and what works for the country that is relatively unique in terms of low taxes or tax incentives."

Geoffrey Soh and Felicia Chia, both partners at KMPG, wrote in International Tax Review that all companies are feeling the impact of shifts in policy at the national and international level. "Every multinational with operations in Singapore is witnessing the impact through more stringent transfer pricing guidelines, the contemporaneous transfer pricing documentation requirement and greater scrutiny of businesses via additional reporting of related-party transactions as part of its tax compliance programme."

Michael Nixon, director of economics at Baker McKenzie.Wong & Leow, said: "There has been a general increase in transfer pricing audits, and disputes are arising more often as a result of those audits."

Nixon noted that Singapore has seen a lot of reissuance of guidelines. "Singapore's transfer pricing guidelines have been updated in each of the last three years, which indicates the desire by tax authorities to both be aligned with international standards articulated in the BEPS project and to robustly enforce transfer pricing rules," he said.

Nixon also mentioned that there had been an increase in TP related consultations and TP questions in general tax audits. He added that the income tax (amendment) bill put forward for consultation by Singapore's Ministry of Finance includes draft legislation intended to update existing TP laws. According to Nixon, the updates cover mandatory requirements for TP documentation and address penalties relating to TP adjustments and the non-preparation of documentation.

The IRAS issued administrative guidelines in 2016, which require taxpayers to adopt the arm's-length principle for their related party transactions. Taxpayers also need to comply with the relevant documentation requirements. The IRAS provided guidance on CbCR on October 10 2016 with reporting scheduled to kick in with the start of the financial year in January 2017.

CbCR will only be applicable to an MNE if the group's ultimate parent company is in Singapore, or if the group's consolidated group revenue in the preceding financial year exceeds €750 million ($884 million) and it has subsidiaries in at least one foreign jurisdiction. A group that is required to prepare a CbCR will have to submit documentation within one year from the end of the financial year.


Tax authorities

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/


Tax rates at a glance

(As of August 2017)

Corporate income tax rate 17% (a)
Capital gains tax rate 0%
Branch tax rate 17% (a)
 
Withholding tax (b)
Dividends 0% (b)(c)
Interest 15% (b)
Royalties from patents, know-how, etc. 10% (b)
Branch remittance tax 0%
 
Net operating losses (years)
Carryback 1 (d)
Carryforward Unlimited (d)

  1. Various tax exemptions and reductions are available (see Section B).
  2. See Section F.
  3. See Section B.
  4. See Section C.

Source: EY 2016 Worldwide Corporate Tax Guide. Visit the guide to read the footnotes in full


Firm contact details

Iyer Practice Advisers