The Inland Revenue Authority of Singapore (IRAS) has announced the indicative margin for related party loans applicable to transactions occurring during the 2025 calendar year (1 January 2025 to 31 December 2025). The published margin is +170 basis points (1.70%), benchmarked against Risk-Free Rates (RFRs).
This indicative margin is central to specific exemptions from contemporaneous transfer pricing documentation requirements under Singapore’s Income Tax (Transfer Pricing Documentation) Rules 2018.
Key Implications for Taxpayers:
- Exemption for Loans ≤ S$15 Million: Taxpayers required to prepare contemporaneous transfer pricing documentation under Section 34F of the Income Tax Act 1947 are exempted from this requirement for both domestic and cross-border related party loans not exceeding S$15 million, provided the related parties agree to apply the published +170bps indicative margin for 2025. (Rule 4(1)(e)).
- Treatment of Domestic Loans:
- Loans Executed BEFORE 1 Jan 2025: Contemporaneous documentation is not required for domestic related party loans of any amount entered into before 1 January 2025, if the lender is not in the business of borrowing and lending money. Applying the indicative margin is not mandatory in this scenario. However, IRAS will restrict the interest expenses claimable by the lender. (Rule 4(1)(d)).
- Loans Executed ON or AFTER 1 Jan 2025: The rules have been amended. For new domestic related party loans:
- Documentation exemption applies only if the parties agree to apply the +170bps indicative margin for 2025.
- Crucially, if the loan amount exceeds S$15 million, both the lender and the borrower must not be in the business of borrowing and lending money to qualify for the documentation exemption under this rule.
The indicative margin simplifies compliance for taxpayers with smaller or non-complex related party loan arrangements by providing a safe harbour rate. Its application directly exempts qualifying loans from the more burdensome requirement of preparing full transfer pricing documentation.
Taxpayers with related party loan arrangements in 2025 should carefully assess these rules and the new indicative margin to determine their documentation obligations and ensure compliance.
Source: IRAS, 2 January 2025.