Transfer pricing documentation is essential for businesses involved in transactions with related parties. It’s not just about following regulations—it’s about ensuring transparency and compliance while minimizing the risk of disputes with tax authorities. But what exactly does it involve, and how can you stay compliant? Let’s break it down in simple terms.
What Is Transfer Pricing Documentation?
Transfer pricing documentation is a record that shows how businesses price transactions with related parties. This could include deals between branches, subsidiaries, or other entities under common ownership.
Tax authorities, like Singapore’s IRAS, require businesses to demonstrate that their pricing aligns with the Transfer Pricing Principle. This means the pricing should reflect what independent parties would agree upon under similar circumstances.
Why Is It Important?
Having proper documentation serves several purposes:
- Prove Fair Pricing: It shows that your pricing is fair and complies with tax laws.
- Avoid Penalties: Without documentation, you risk fines, double taxation, and other penalties.
- Facilitate Reviews: Good documentation helps tax authorities quickly review and resolve issues.
Key Requirements for Transfer Pricing Documentation
Here’s what you need to know:
Who Needs to Prepare It?
- Businesses with more than S$10 million in annual gross revenue from their trade or business.
- Businesses already required to prepare documentation in the previous financial year.
What Does It Include?
- Group Overview: Information about the business group and its relevance to operations in Singapore.
- Detailed Transaction Data: Detailed information on the business as well as functional analysis and transfer pricing analysis of transactions with related parties.
Exemptions
You might not need documentation for:
- Domestic transactions under the same tax rate.
- Transactions below certain thresholds.
When to Prepare?
- By the Income Tax Return filing due date.
Submission Requirements
- Only submit documentation if IRAS requests it—within 30 days of the request.
Refresh Frequency
- Update your documentation every three years, provided no significant changes occur.
Retention Period
- Keep your records for at least five years.
Penalties for Non-Compliance
Non-compliance can result in a fine of up to $10,000 for:
- Failing to prepare or update documentation.
- Not submitting documentation within 30 days of a request.
- Retaining records for less than five years.
- Providing false or misleading information.
Transfer Pricing Documentation Requirements (Section 34F)
Aspect | Key Requirements |
Who Must Prepare | 1. Businesses with more than S$10 million gross revenue in the relevant financial year. |
2. Businesses that needed to prepare documentation in the previous financial year. | |
What to Prepare | 1. Group Overview: General information about the group and its operations in Singapore. |
2. Transaction Details: Information about business activities, related party transactions, and pricing. | |
Exemptions | Some transactions are exempted, such as: |
– Domestic transactions taxed at the same rate. | |
– Transactions below specific value thresholds. | |
When to Complete | By the Income Tax Return filing deadline for the financial year. |
When to Submit | Only if requested by IRAS, within 30 days of their request. |
When to Refresh | Update every three years (or sooner if there are changes). |
How Long to Retain Records | Keep documentation for at least 5 years after the transaction period ends. |
Penalty for Non-Compliance | Fine of up to $10,000 for non-compliance, such as: |
– Failing to prepare or submit on time. | |
– Providing false or incomplete information. |
How YYC Can Help
Navigating transfer pricing rules can be challenging, but YYC is here to simplify the process. Our team offers:
- Expert guidance in preparing accurate documentation.
- Proactive strategies to minimize risks.
- Ongoing support to keep your business compliant and thriving.
Please reach out to us and let YYC take care of the technicalities while you focus on growing your business.
Quick Highlights
- Transfer pricing documentation proves fair pricing between related parties.
- Businesses with over $10 million revenue must prepare documentation.
- Penalties for non-compliance include fines up to $10,000.
- YYC is your partner in simplifying and managing transfer pricing compliance.