The Inland Revenue Authority of Singapore on August 10 published the sixth edition of its e-tax guide on transfer pricing, adding a new chapter on cost contribution arrangements, expanding guidance on financial transactions, and making other revisions throughout.
New chapter 17 explains rules dealing with cost contribution arrangements for businesses entering into contractual arrangements to share contributions and risks associated with the development of intangible or tangible assets or the obtaining of services. The chapter includes definitions and examples of cost contribution arrangements and describes common types.
Regarding transfer pricing of cost contribution arrangements, the new chapter explains how to apply the arm’s length principle to such arrangements, including determining participants and allocations of expected benefits and contributions. It also clarifies the arm’s length requirement for entry and withdrawal of participants and termination of the arrangement. The new guidance further addresses the tax treatment of cost contribution arrangements and transfer pricing documentation requirements.
The expanded chapter on related party financial transactions includes guidance on applying the arm’s length principle to related party financial transactions other than loans, such as cash pooling, hedging, financial guarantees, and captive insurance. The previous edition of the guide only addressed related-party loans. The expanded financial transactions chapter also includes new guidance on whether a purported loan should be regarded as a loan.
Other expanded content in the latest edition includes a new appendix in chapter 6 that answers frequently asked questions with respect to transfer pricing documentation. Other chapters have also been partially revised or moved. In addition, the “Transfer Pricing Consultation” program has been redubbed the “Transfer Pricing Audit” process in chapter 7.
The latest edition also adds new cross-references to additional helpful Singapore transfer pricing guidance in chapter 18.
The previous edition of the guide was issued in February 2018.
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