Transfer pricing in retro - 2006

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Back in July 2006, the Inland Revenue Authority of Singapore (IRAS) organised its first transfer pricing conference in collaboration with several renowned tax and business consulting firms, including PricewaterhouseCoopers (PwC).

Over 600 executives and tax practitioners attended the half-day forum titled: Transfer Pricing in Singapore – What you need to know.

It officially signalled IRAS's intention to focus resources in this area in the coming years. In future postings, I will attempt to provide the latest update on this front.

In 2006, Mr. See Jee Chang, IRAS’s Director for International Tax/Tax Policy & Ruling, highlighted two areas that require further clarification.

• One area relates to the current practice of not requiring interest on intercompany loans.
• The second relates to the common practice of charging a 5% profit mark-up for intercompany services.

At that preliminary stage, IRAS did not provide any detailed guidance but only signalled that related party loans involving foreign entities may be subject to adjustments.

With regard to intercompany services, IRAS mentioned that while a 5% mark-up may be accepted for routine services, the arm’s length principle may imply higher mark-ups for non-routine, value-added services.