On or about 19 Mar 2021, the Inland Revenue Authority of Singapore (IRAS) has published an IRAS e-Tax Guide on Transfer Pricing Guidelines Special Topic – Centralised Activities in Multinational Enterprise Groups.
This e-Tax Guide:
- Discusses the economic value contributions of centralised activities in Singapore and their importance to a multinational enterprise (“MNE”) group; and
- Provides guidance on how to analyse such activities carried out in Singapore between related parties, the factors that may affect the transfer price for these activities and the transfer pricing methods that may be appropriate.
A large number of headquarters (“HQs”) housed in Singapore, including those from the world’s leading companies. MNE groups looking to deepen their presence in Asia may leverage Singapore as a home to centralise key decision-making, management and coordination, build customer insights and develop product and services strategies for local markets. In turn, Singapore-based service providers have deepened capabilities and broadened their networks to support business, innovation and talent needs of HQs.
Within the context of MNE groups, there are many different transactions among the various members in the group. A thorough examination of the actual functions performed, assets used, and risks assumed in each specific related party transaction is important in determining the arm’s length transfer price.
Section 7 of the guide provides guidance on how to analyse the related party transactions and the transfer pricing methods that may be appropriate to determine the arm’s length transfer price for activities that are centralised. The guidance for other related party transactions is provided in the IRAS Transfer Pricing Guidelines.
Source: IRAS, 22 Mar 2021