Navigating Transfer Pricing: Simplifying intragroup service charges under safe harbour rules

However, ensuring compliance with the arm's length principle, especially when setting charges for these services, remains a crucial task for taxpayers.

To ascertain the appropriate charge for such services, various transfer pricing methods could be considered. Typically, these methods include: 

1. Comparable uncontrolled price method: Comparing prices in similar transactions between related and unrelated parties.
2. Cost plus method: Adding a mark-up to the costs incurred in providing the services.
3. Transactional net margin method: Analysing the net profit margin of the controlled transactions with the relevant benchmarking results.

In Singapore, the Inland Revenue Authority (IRAS) has implemented measures to ease the compliance burden for taxpayers. IRAS grants concessions, such as allowing a 5% mark-up for routine support services, simplifying the determination of arm's length fees for these services.

Moreover, IRAS accepts the simplified approach recommended by the OECD (“Organization for Economic Co-operation and Development”) for low value-adding intragroup services. This simplified method involves a 5% profit mark-up without the need for extensive benchmarking analysis.

Understanding and utilizing these concessions can significantly reduce the cost and complexity of conducting benchmarking analyses for intragroup transactions.

How can we help?

At Mazars, we specialize in providing expert guidance on managing these intricacies. Our services include:

• Conducting health checks on a group's transfer pricing policies and cost base related to intragroup service arrangements.
• Establishing the most appropriate pricing policy for intragroup services, with or without the need for benchmarking analysis.
• Reviewing intragroup service agreements from the perspective of Singapore tax laws and transfer pricing regulations.
• Preparing transfer pricing documentation that meets IRAS's requirements, if needed.

In the ever-evolving realm of transfer pricing landscape, having the right expertise by your side can make all the difference in ensuring compliance while maximizing operational efficiency.

Should you have any queries or require further assistance, our tax experts are ready to help. Feel free to reach out to us for a detailed consultation.

Do you have any questions for us?

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