The Inland Revenue Authority of Singapore (IRAS) has implemented significant amendments to the Income Tax (Transfer Pricing Documentation) Rules 2018 from 10 June 2024. The changes impact exemption conditions for preparing transfer pricing (TP) documentation, affecting taxpayers with related party transactions.
Key amendments include:
- Dated Declaration for Qualifying Past TP Documentation:
- For related party transactions occurring in the basis period for the Year of Assessment (YA) 2026 or subsequent YAs, taxpayers claiming exemption based on a prepared qualifying past TP documentation must now ensure their declaration includes a specific date.
- Stricter Conditions for Domestic Loan Exemption:
- For related party domestic loan agreements entered into on or after 1 January 2025, obtaining an exemption from preparing TP documentation now requires meeting additional criteria:
- Neither Party in Lending Business: Both the lender and the borrower must not be engaged in the business of borrowing and lending money.
- Mandatory Use of IRAS Indicative Margins: The parties must have explicitly agreed to apply the indicative loan interest margin published by IRAS for the specific year in which the loan is granted. These indicative margins are updated annually on the IRAS website.
- For related party domestic loan agreements entered into on or after 1 January 2025, obtaining an exemption from preparing TP documentation now requires meeting additional criteria:
- Increased Exemption Threshold for Services/Intangibles:
- The monetary threshold for exemption from preparing TP documentation for specific categories of related party transactions (e.g., provision of services, grant of rights to use movable property) has been increased.
- For transactions undertaken in basis periods for YA 2026 and subsequent YAs, the threshold rises from S$1 million to S$2 million per category per basis period.
- The existing thresholds for related party purchases/sales of goods (S$15 million) and related party loan transactions (S$15 million) per basis period remain unchanged.
Taxpayers relying on exemptions for domestic loans or past TP documentation must carefully review the new requirements. Those benefiting from the S$1 million threshold for services/intangibles should note the increased S$2 million limit applies to transactions impacting YA 2026 and later. Ensuring compliance with the dated declaration rule and the stricter domestic loan conditions (including using IRAS indicative margins) is crucial for taxpayers seeking exemptions from the TP documentation requirement.
Source: Government Gazette, 10 June 2024.