The Income Tax (Transfer Pricing Documentation) Rules 2018 (S 93/2018) made on 21 February 2018, outline the requirements under section 34F(3) of the Singapore Income Tax Act in preparing transfer pricing documentation by an applicable entity with a related party in a basis period specified. The Rules are deemed to be effective from 23 February 2018 and are effective for the Year of Assessment 2019 and every subsequent year of assessment.
The Arm’s Length Principle
IRAS recommends that taxpayers adopt the following 3-step approach to apply the arm’s length principle in their related party transactions:
Step 1 – Conduct a comparability analysis
Step 2 – Identify the most appropriate transfer pricing method and tested party
Step 3 – Determine the arm’s length results
For further information on a 3-step approach to apply the arm’s length principle in related party transactions as recommended by IRAS, please refer to the e-Tax Guide on Transfer Pricing Guideline (Fifth Edition) which was published on 23 February 2018, Part I, section 5.
Source: IRAS website, 23 February 2018