Q：
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What is arm’s length principle?
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A：
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Arm's length principle is an internationally endorsed standard, to guide the pricing of transactions between related parties. IRAS subscribes to the principle that profits should be taxed where the real economic activities generating the profits are performed and where value is created. The arm's length principle requires that transfer prices between related parties are equivalent to prices that unrelated parties would have charged under the same or comparable circumstances.
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Q：
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How if there is non-compliance with Arm’s Length Principle and TP documentation?
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A：
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IRAS will carries out Transfer Pricing Audit to review the transfer pricing and transfer pricing documentation.
Where the pricing of related party transactions is not at arm's length and results in a reduced profit for the Singapore taxpayer, IRAS will makes a transfer pricing adjustment and imposing a surcharge of 5% on the adjustment.
Where there is non-compliance with TP documentation requirement, a taxpayer is liable to a fine not exceeding $10,000.
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Q：
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Who need to prepare TP documentation?
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A：
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Companies who meet either of the following conditions must prepare the TP documentation for their related party transactions undertaken in a basis period:
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Gross revenue derived from their trade or business is more than S$10 million for that basis period; or
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TP documentation is required to be prepared for the previous basis period.
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Q：
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When to submit the TP documentation?
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A：
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The TP documentation have to be completed by filing due date of the Income Tax Return. Taxpayers do not need to submit the TP documentation when they file their Income Tax Returns. They are, however, required to submit the TP documentation within 30 days of a request by IRAS.
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Q：
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Is company need to report Related Party Transactions (RPT)?
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A：
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Company must complete the Form for Reporting RPT if the value of RPT disclosed in the financial statements for the financial period exceeds S$15 million.
The value of RPT is the sum of:
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All amounts received/ receivable from related parties and all amounts paid/ payable to related parties as reported in the Income Statement, but excluding compensation paid to key management personnel and dividends; and
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Year-end balances of loans and non-trade amounts due from/ to all related parties.
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FAQ
