SINGAPORE Law and Practice Contributed by: Yang Shi Yong, Drew & Napier LLC
International Transfer Pricing Issues Where there is an international transfer pricing dis - pute, a Singapore tax resident taxpayer can resolve the issue either by taking legal remedies in the country where the transfer pricing adjustment is made, or by making a Mutual Agreement Procedure (MAP) appli - cation under the relevant tax treaty. There is a general increase in the number of transfer pricing disputes resolved through MAPs. The Comptroller endeavours to resolve a MAP case within 24 months after receiv - ing a complete application. 5. Taxation of Non-Local Corporations 5.1 Compensating Adjustments The Comptroller may make a transfer pricing adjust - ment to increase the profits of taxpayers who do not comply with the arm’s length principle and have understated their profits. Where a transfer pricing adjustment has been made, a surcharge of 5% on the transfer pricing adjustment will also be payable. Subject to certain conditions, the Comptroller may wholly or partly remit any surcharge payable. Compensating adjustments may be made when trans - fer pricing claims are settled through MAPs. 5.2 Local Branches and Local Subsidiaries Both local branches and local subsidiaries of non- local corporations will be subject to Singapore tax on their income that is accrued in, derived in or received in Singapore. The same corporate tax rate of 17% will apply to both. However, a local branch will only be taxed on the profits attributable to its permanent establishment in Singapore. 5.3 Capital Gains of Non-Residents The capital gains on the sale of shares in local cor - porations are not taxable in Singapore. However, the capital gains on the sale of shares in a non-local hold - ing company are taxable if the sale occurs on or after 1 January 2024, and the gains are received in Singa - pore from outside Singapore by an entity of a “relevant group”. A group is a “relevant group” if either the enti - ties of the group are not all incorporated, registered or established in a single jurisdiction, or any entity of the group has a place of business in more than one
• maintaining contemporaneous transfer pricing documentation (subject to certain conditions and exemptions); • submitting a Form for Reporting Related-Party Transactions as part of the corporate income tax return if the value of related party transactions disclosed in the financial statements for a financial period exceeds SGD15 million; and • filing a country-by-country (CbC) report if the local corporation is a Singapore-headquartered multina - tional enterprise (subject to other conditions). 4.5 Challenges to Related-Party Limited Risk Distribution Arrangements Where the use of related-party, limited risk distribution arrangements is at arm’s length, the Comptroller is unlikely to make an adjustment to increase the amount of income that is accrued in Singapore, or to reduce the amount of deduction allowed. An arrangement is at arm’s length if the same terms and conditions would have been made if the contracting parties are unrelated and dealing independently with one another in similar circumstances. 4.6 Local Transfer Pricing Rules and OECD Standards The transfer pricing rules and administrative guide - lines in Singapore are generally aligned with the OECD Guidelines. 4.7 Transfer Pricing Disputes and Mutual Agreement Procedures Domestic Transfer Pricing Issues The Comptroller may raise transfer pricing queries when assessing the taxpayers’ corporate income tax or conducting a transfer pricing audit. Taxpayers will be selected for a transfer pricing audit based on risk indicators such as the value of related-party transac - tions, and the performance of a business over time. In making transfer pricing queries, the Comptroller can use “new” information received to re-open ear - lier years. Except in cases of fraud, the statutory time limit to re-open earlier years is four years after the expiry of that year of assessment. Taxpayers should bear in mind that a surcharge of 5% will be imposed where transfer pricing adjustments are made by the Comptroller, regardless of whether any additional tax is payable on the adjustments.
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