Transfer Pricing in Singapore

Transcription

1 Transfer Pricing in Singapore 27 April Twitter.com/IRAS_SG Facebook.com/irassg History of Singapore TP Regime Updated guidance on Transfer Pricing Docs and admin matters Revised TP Guidelines (2015) TP guidance (2006) Provides guidance via e-tax guides, information at IRAS website Legislation Enacted in Income Tax Act S34D on (2009) Transactions not at arm s length TP consultation (2008) Conducts TP consultation (e-tax guide) 2 1

2 What is Transfer Pricing? Pricing of goods/services between related parties Transaction of non-arm s length pricing between related parties Price distortion Reduction of taxes 3 Arm s length pricing Related party transaction with pricing similar to transaction with 3 rd party under comparable circumstances 4 2

3 Arm s Length Principle IRAS endorses the arm s length principle as the standard to guide transfer pricing Market forces of supply and demand are the best way to allocate resources and reward effort Taxpayers and tax authorities will have a common basis to deal with related party transactions and the incidence of transfer pricing adjustments will be reduced 5 TP Documentation Information and records as evidence Substantiation of arm s length transfer price Contemporaneous Appropriate and sufficient Periodically updated Group and Entity level 6 3

4 TP Documentation Demonstrate compliance with arm s length principle Manage domestic and cross-border TP risk Defend pricing in TP audits Assist authorities in MAPs and APAs 7 TP Consultation (TPC) TPC started in August 2008 To assess taxpayers level of compliance with arm s length principle To assess taxpayers level of TP documentation To advise taxpayers on areas for improvement 8 4

5 TPC - Case Selection Process Extract data on companies related party transactions and compute financial ratios for multiple years Risk indicators Substantial amount of related party transactions Low gross or operating margins Use of intellectual property, proprietary knowledge or other intangibles in the business Comparison of company results with industry Other available information indicating risks 9 Observations & Recommendations from TPC Cases Majority of taxpayers being reviewed have inadequate TP documentation (73%) Results of consultations / reviews % With contemporaneous TP documentation 27 Prepared documentation upon selected for TPC 37 No documentation

6 Observations & Recommendations from TPC Cases Lack knowledge of functions and risks of the company Tax/Finance staff are not familiar with the operations Generally, the more valuable the function, the more details are to be provided 11 Mutual Agreement Procedure (MAP) TP Audits with TP adjustments by other tax authorities Taking legal remedies in the jurisdiction in which the adjustments are made; and / or Requesting IRAS to resolve the issue through MAP 12 6

7 Advance Pricing Arrangements (APAs) Avoid potential transfer pricing disputes through APAs Dispute prevention facility Agreement in advance of a set of criteria to ascertain the transfer pricing for a specific period of time. 13 MAP/APA Expectations and obligations Time-consuming and resource intensive Evaluate and apply for MAP or APA only if: Incidence of double taxation is certain or highly probable Robust basis and TP documentation Necessary resources to support the process In-depth cost-benefit analysis to determine suitability of MAP and APA 14 7

8 MAP/APA Expectations and obligations Success of MAP and APA process depends on cooperation from taxpayers Taxpayers should: Act in good faith Comply with all process requirements Provide full access to information and documentation Be forthcoming in providing complete and reliable information and analysis 15 Singapore MAP/APA Experience Under review Concluded Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar

9 Singapore MAP/APA Experience Received MAP and BAPA applications with Australia, Canada, China, France, Germany, India, Indonesia, Israel, Japan, Korea, Luxembourg, Malaysia, Netherlands, Sweden, Taiwan, Thailand, UK Concluded MAP and BAPA applications with Australia, Canada, China, France, Japan, Korea, Netherlands, Taiwan and UK 17 On-going support for Transfer Pricing Continue to help taxpayers strengthen their due diligence IRAS e-tax Guide - Transfer Pricing Guidelines (Second edition) IRAS - Seminar on Transfer Pricing Documentation SIATP and Tax Academy Seminar of Transfer Pricing Guidelines Milestone Jan 2015 Jan 2015 Feb 2015 May

10 Conclusion Companies are encouraged to ensure the adequacy and reliability of TP documentation to support the arm s length nature of its related party transactions and minimise double taxation