A company is allowed to transfer excess current year trade losses, current year tax depreciation, and current year approved donations to another company within the same group if certain conditions are satisfied.
Broadly, to qualify for group relief, companies must be incorporated in Singapore, belong to the same group of companies where, among other things, there must be at least a 75% ownership relationship between claimant and transferor, and have the same accounting year-end. In addition, a group must comply with certain prescribed offset and apportionment rules.
The Income Tax Act contains specific transfer pricing provisions that define the arm’s-length principle and provide the tax authorities with a right to make transfer pricing adjustments in cases where taxpayers do not comply with the arm’s-length principle.
In 2017, these transfer pricing provisions were enhanced to introduce mandatory contemporaneous documentation requirements, penalties for non-compliance, and a surcharge to be imposed at 5% of the transfer pricing adjustment value. In general, businesses with turnover exceeding SGD 10 million are required to maintain contemporaneous transfer pricing documentation with effect from the year of assessment 2019, subject to certain exemptions as defined. Failure to comply with these requirements (including contemporaneous transfer pricing documentation) could result in a penalty not exceeding SGD 10,000. The tax authorities are also given the power to disregard the form of a transaction where the substance of it is inconsistent with the form.
The tax authorities have issued revised transfer pricing guidelines to supplement the provisions in the Income Tax Act. Guidance is also provided on matters relating to mutual agreement procedures (MAPs) and advance pricing arrangements (APAs).
Country-by-country (CbC) reporting
On 21 June 2017, Singapore signed the Multilateral Competent Authority Agreement on the exchange of CbC Reports. For income years beginning on or after 1 January 2017, Singapore-headquartered multinational enterprises with global revenues exceeding SGD 1,125 million have to submit to the IRAS an annual CbC report containing the income, taxes paid, and other indicators of level of economic activities in every tax jurisdiction where they operate. The IRAS will exchange CbC reports with jurisdictions with which Singapore has entered into bilateral agreements for the exchange of CbC reports.
There are no formal thin capitalisation rules in Singapore. However, general anti-avoidance and transfer pricing provisions may operate in cases of abuse.
Controlled foreign companies
There are no CFC rules in Singapore.