Changes To Singapore’s Transfer Pricing Rules From YA 2026

Effective from June 10, 2024, the Singaporean government introduced significant amendments to the Income Tax (Transfer Pricing Documentation) Rules, aimed at updating the requirements for transfer pricing documentation. These changes, which apply from the year of assessment (YA) 2026 onwards, focus on increasing the thresholds for mandatory documentation, thereby reducing the compliance burden for smaller entities and enhancing the focus on larger, higher-risk transactions.

Below, we outline these key changes and their implications for businesses.

Key changes

1. Specific transactional thresholds

The amendments introduce specific thresholds for different types of transactions, making it clearer which transactions require documentation:

  • Purchase and Sale of Goods: Transactions involving the purchase or sale of goods with related parties must be documented if the total transaction value exceeds SGD 15 million per year.
  • Provision of Services: Services provided to or received from related parties must be documented if they exceed SGD 2 million annually.
  • Rights to Use Movable Property: Transactions involving rights to use movable property must be documented if the total value exceeds SGD 2 million annually.
  • Leases and Guarantees: Leases and guarantees provided to or received from related parties must be documented if they exceed SGD 2 million annually.
  • Other Transactions: Any other types of transactions must be documented if the total value exceeds SGD 2 million annually.

2. Updated loan transaction provisions

The rules introduce specific conditions for related-party loan transactions:

  • For loans entered into before January 1, 2025, the conditions include that the party granting the loan is not engaged in the business of borrowing and lending money.
  • For loans entered into on or after January 1, 2025, additional requirements include the application of the indicative margin for the year in which the loan is granted.

Implications for businesses

These changes have several significant implications for businesses operating in Singapore:

  • Reduced compliance burden for smaller entities

By increasing the revenue threshold, the amendments relieve small and medium-sized enterprises (SMEs) from the extensive documentation requirements, enabling them to allocate resources more efficiently.

  • Focus on high-risk transactions

The specific transactional thresholds allow tax authorities to focus on higher-risk and higher-value transactions, ensuring more effective regulatory oversight. This means businesses with significant cross-border transactions must ensure robust documentation to support their pricing strategies.

  • Alignment with international standards

The updated rules align with international best practices, particularly those set by the OECD. This alignment strengthens Singapore’s position as a transparent and compliant jurisdiction, making it more attractive for multinational enterprises.

  • Preparation for increased scrutiny

Businesses must prepare for increased scrutiny by ensuring their documentation is thorough and complies with the new thresholds. This preparation is critical to avoid potential penalties and support their tax positions during audits.

Conclusion

The amendments to the Income Tax (Transfer Pricing Documentation) Rules reflect Singapore’s commitment to maintaining a robust regulatory environment for transfer pricing. By increasing thresholds and specifying detailed requirements for various transaction types, these changes aim to enhance compliance and focus regulatory efforts on higher-risk transactions. Businesses must adapt to these new rules, ensuring their documentation practices are up-to-date and comprehensive to avoid penalties and support their tax positions effectively.

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*The above represents our opinions and views and does not necessarily reflect the position of any entities mentioned.