Tax Executives Institute, Inc. (TEI) has provided excellent comments to the transfer pricing documentation paper by the Inland Revenue Authority of Singapore (IRAS). TEI responds to five questions of the Consultation Paper. A link to their comments, and the Singapore Consultation Paper, are included for reference:
- The proposed rules for documentation by December elevate Singapore’s transfer pricing documentation requirements to a higher level than the current OECD guidelines, prior to its final recommendations, including how the Master File should be filed and transition thereto.
- The Consultation sets forth guidelines for non-related Singapore entities including the provision of a functional analysis for contributions to value creation by each related group member, consolidated financial statements of the group, and transfer pricing policies re: all types of transactions between group members.
- Confidentiality concerns arise with respect to the proposed rules, accordingly appeals for exemption should be appropriately provided.
- Adverse consequences for not providing “adequate documentation” (term not defined), including withdrawal of MAP support set forth in the relevant treaty.
- TEI has proposed de minims thresholds to exclude immaterial transactions and excluding documentation for intra-country transactions.
- TEI has suggested an approach to implementing new documentation guidance tracking OECD BEPS developments, with lead time to adjust processes accordingly.
TEI has provided a valuable contribution in their well-written and thoughtful comments to significant issues posed by countries unilaterally adopting new transfer pricing documentation rules prior to finalization of the OECD BEPS initiatives.
Most importantly, Singapore has suggested using domestic legislation to override the MAP process in treaties as well as introducing overly comprehensive documentation that has no relevance to the domestic entity and its intercompany transactions or transfer pricing methodologies.
This initiative by IRAS is indicative of a parade with an OECD banner, although each member has a different drummer and leader with distinct initiatives and its concept for application of the “arm’s-length principle” to determine its fiscal fair share of tax to be collected from multinationals that will be determined prior to official OECD guidelines. It is imperative that all interested parties follow this initiative by Singapore, in addition to correlative initiatives by other countries.