What is Transfer Pricing Documentation?
The Transfer Pricing Documentation (TPD) is prepared at the end of the financial year and is now taking center stage across jurisdictions.
The Transfer Pricing Documentation includes a description of supply chain, business models & strategies, value drivers of profit, industry analysis, description of intangibles assets and the related functions, financing arrangements, restructurings within the group and rationale for the same, assumptions behind the rejig of supply chains, commercial factors considered while taking decisions regarding shifting of functions and risks, basis of arriving at the arm’s length price, benchmarking analysis and economic adjustments.
The above-mentioned information is of paramount importance to support the arm’s length pricing of related party transactions. It also enables key stakeholders to regularly monitor the pricing.
Singapore Transfer Pricing Documentation
In 2018, there was an insertion of a new section in the Singapore Income Tax Act – Section 34F. It is mandatory for a Singapore Company to prepare Transfer Pricing Documentation. This is in accordance with the Income Tax (Transfer Pricing Documentation) Rules, 2018.
As per Section 34F, a Singapore Company must prepare Transfer Pricing Documentation for a particular financial year, if either of the following conditions are met:
- Gross revenue of the Singapore Company exceeds SG$10 Mn; or
- The Singapore Company had to prepare Transfer Pricing Documentation in the previous financial year.
COVID – 19 Support Measures by IRAS on Transfer Pricing
Information to be included* (to the extent applicable) in the Transfer Pricing Documentation. This is to substantiate the impact of COVID on profitability:
Industry analysis:
Effect on industry due to COVID and as a consequence how it has impacted the Group/ the Singapore entity.
For example, the tourism sector has been badly hit. Therefore, the Singapore entity should highlight the impact on industry and specifically the intensity of impact on the Singapore entity keeping in view the characterization.
Key decision-makers:
Which entity in the Group is responsible for taking key decisions and accordingly is responsible for assuming the related risks.
For example, the key decisions regarding supply chain, go-to-market strategy, resumption of operations.
Read more about Singapore Transfer Pricing at Rikvin.com.
