Singapore to let Taxpayers try Simplified Transfer Pricing Rules

3 minutes

The Inland Revenue Authority of Singapore (IRAS) has published the eighth edition of the Transfer Pricing Guidelines (TP Guidelines). The TP Guidelines outline the IRAS' TP and audit processes, as well as its administrative position on various TP issues.

Singapore

Among the various updates, section 19 of the TP Guidelines introduces a new OECD-endorsed simplified and streamlined approach (SSA) – referred to as "Amount B" in OECD nomenclature – which is designed to simplify and streamline the application of the arm's length principle for qualifying baseline marketing and distribution transactions entered into between related parties (qualifying transactions).

Singapore taxpayers that meet the prescribed qualifying conditions may elect to apply the SSA, which approximates an arm's length price for qualifying transactions for any financial year between 1 January 2026 and 31 December 2028. Taxpayers that do not elect to apply the SSA are expected to continue determining arm's length prices using accepted TP principles.

Qualifying Conditions for SSA

Singapore taxpayers may elect to apply the SSA if the following three conditions are met:

  • the SSA must be applied to a qualifying transaction. Related party transactions that are regarded as "qualifying transactions", and therefore within scope of the SSA, are:

    • buy-side marketing and distribution transactions where the distributor purchases goods from a related parties for wholesale distribution to unrelated parties; and
    • sales agency and commissionaire transactions where the sales agent or commissionaire contributes to a related parties wholesale distribution of goods to unrelated parties.

    It is worth noting that the words "wholesale distribution" cover the distribution of goods to customers who are not end-consumers.

    Where a transaction involves the distribution of non-tangible goods or services, or the marketing, trading or distribution of commodities, or if the distributor, sales agent or commissionaire (tested party) carries out both qualifying transactions and non-distribution activities that are incidental to the qualifying transactions, then such a transaction would generally not be eligible for the SSA;

  • the qualifying transaction must be capable of being reliably priced using a one-sided TP method with the tested party, and, the one-sided TP methods approved in the TP Guidelines are the traditional transaction and the transitional net margin methods; and

  • the tested party in the qualifying transaction must incur annual operating expenses of between 3% and 30% of its annual net revenues (OES ratio).

    As the term implies, the OES ratio is calculated yearly on a 3-year weighted average basis (see paragraph 19.6 for details).

Singapore taxpayers that satisfy these qualifying conditions may (not must) apply the SSA to determine the TP for the qualifying transaction of the tested party. Paragraphs 19.7 to 19.17 of the TP Guidelines set out the two-step approach for determining the return of sales for the tested party under the SSA, and also provide worked examples to guide users through the various calculations. In addition, the documentation requirements relevant to taxpayers that have elected to apply the SSA can be found in paragraphs 19.18 of the TP Guidelines.

Cross-Border Considerations

Not all Inclusive Framework members have implemented the SSA, and its application may vary across jurisdictions. Tax authorities of the jurisdiction where the Singapore taxpayer's counterparty is located are not obligated to accept the application of the SSA to a qualifying transaction, and adjustments made by a foreign jurisdiction to the transaction could potentially result in the double taxation of the underlying profits.

Where a tax treaty is effective between Singapore and that foreign jurisdiction, the taxpayer may submit an application for the IRAS to resolve the double taxation suffered through the mutual agreement procedure provided under the relevant treaty (see sections 10 and 11 of the TP Guidelines for details on Singapore's MAP process). The list of covered jurisdictions with which Singapore has concluded effective tax treaties is available here.

The TP Guidelines were published on 19 November 2025. Further developments will be reported as they occur.

Report from our correspondent Janus Lim, Tax Author, Singapore. Follow our reporting on this via our daily Tax News Service (subscribers only).