Transfer Pricing Guidelines in Commodity Trading by IRAS
The Inland Revenue Authority of Singapore (‘IRAS’) released the first edition of the Transfer Pricing Guidelines Special Topic—Commodity Marketing and Trading Activities in May 2019 (‘e-tax guide’). The e-Tax guide is the first special topic guide and provides guidance on how to analyze the value chain of commodity marketing/ trading activities in Singapore.
Singapore is a leading hub for international commodity trade as it is at the crossroads of major shipping and communication routes, has one of the world’s major oil refining and distribution centres, and is in close proximity to producers, suppliers, global trading entities and fast-growing markets. Therefore, due to locational advantages, a number of multinational enterprises have set up operations in Singapore to conduct commodity marketing and trading activities.
Commodity Trading Economic Significance
Commodity trading involves a complex value chain and the level of contribution at each stage differs. The value created at various stages would determine the arm’s length allocation of trading profits. Contribution to value creation is not based on the number of functions performed, but the economic significance of the functions in terms of their frequency, nature, and value created by the respective parties to the transaction is important.
Read more about Transfer Pricing Guidelines in Commodity Trading at InCorp Global.
