Singapore’s 8th Edition Transfer Pricing Guidelines: Comprehensive Updates and Strategic Implications for Businesses

Introduction

The Inland Revenue Authority of Singapore (IRAS) issued the Eighth Edition of its Transfer Pricing Guidelines (TPG8) on 19 November 2025. The new edition refines several areas of the earlier guidance¹ and introduces an OECD-aligned safe harbour for certain low-risk transactions. Overall, the changes reflect IRAS’s aim to balance compliance relief for routine cases with a continued emphasis on robust documentation and substance. Below, we outline the key amendments and their implications for tax practitioners, in-house counsel, and multinational groups with Singapore operations.

 

Key Amendments:

1. Transfer Pricing Documentation

• Qualifying Past Documentation Declaration:
  • IRAS clarifies the use of “simplified” documentation for repeating transactions. Taxpayers can rely on prior-year contemporaneous reports (so-called qualifying past TP documentation) instead of preparing entirely new files, but must explicitly declare that the old documentation meets the TPG criteria.
  • Implication: Companies planning to roll-forward prior TP analyses must formally attest that the prior study is still applicable and fulfills IRAS’s criteria. In practice, if no significant facts or comparables have changed, a simplified TP memo with a declaration may be used in lieu of a full report.

2. Financial Transactions:

• Domestic Loans Treatment
  • For related-party loans where neither party is in the business of lending/borrowing, IRAS now provides relief. Starting from loans entered on or after 1 January 2025, IRAS will not make transfer-pricing adjustments under Section 34D, nor require TP documentation, even if no interest is charged. This represents a clear policy shift from the previous TPG7: IRAS appears to be easing compliance for domestic intra-group finance with low risk of tax leakage, focusing audit resources on higher-risk cases.
  • Implication: Companies in non-banking groups can structure domestic loans without TP scrutiny, but must still apply interest deduction rules correctly. All other domestic or cross-border loans must be priced at arm’s length, either via a TP analysis or IRAS’s indicative margin (especially for loans ≤ SGD15 million)
• Cross-border Loans Treatment
  • IRAS has clarified that no transfer pricing adjustment will be made on outbound related-party interest-free loans (IFLs), as no interest income is remitted into Singapore. This reflects a practical application of Singapore’s remittance basis of taxation. Additionally, where the Singapore lender has incurred interest expenses to fund such loans, those expenses will be disallowed if the loan is a passive source of income, since they are not regarded as incurred in the production of income. IRAS also confirms that it will not impute interest income on inbound IFLs to Singapore borrowers, as such imputed interest would not be deductible and there is no withholding tax liability.
  • Implication: The clarification provides welcome certainty for taxpayers with cross-border IFLS. However, companies must be mindful that any interest expenses related to such loans may be non-deductible.
• Recharacterisation of Arrangements:
  • The new guidelines remind taxpayers that IRAS retains broad powers to recharacterise funding arrangements that lack economic substance. IRAS may disregard or replace transactions in exceptional circumstances where (i) the arrangement lacks commercial rationality and (ii) the parties could not realistically have agreed to the stated pricing (or terms). Hybrid instruments or contrived debt provisions designed to achieve a tax outcome may be varied or ignored.
  • Implication: This emphasis on substance over form signals a tightened enforcement stance. In practice, companies should ensure every funding arrangement has a clear business purpose and be prepared to support their characterisation with detailed analysis.

3. Capital Transactions:

• TP Adjustments for Capital Transactions:
  • IRAS has expanded its guidance on transactions of a capital nature. Notably, taxpayers are now explicitly required to substantiate the basis for treating any gain, loss or expense as “capital in nature,” i.e. not part of taxable income. This means that when a related-party transaction involves a capital asset (for example, a sale of fixed assets or an investment write-off), the taxpayer should explain why the gain is capital in nature. In addition, a new paragraph outlines the recourse available if a taxpayer disagrees with an IRAS-initiated TP adjustment on a capital transaction, essentially directing the taxpayer to follow the normal objection and appeal process, or seek double tax relief via MAP where applicable.
  • Implication: Companies should maintain workpapers or legal analyses supporting any capital classification in related-party transactions. The explicit mention of the dispute process makes clear that any IRAS recharacterisation of a capital transaction must be challenged through formal objection or MAP procedures, as informal settlements will not be available.

4. Mutual Agreement Procedure (MAP):

• Further Streamlined MAP Process:
  • IRAS reaffirms the removal of the mandatory pre-filing meeting introduced in the 7th edition. Companies may now submit a MAP request immediately (within treaty timelines), with pre-filing discussions remaining optional and only on the company‘s initiative. It also introduces guidance on “protective” MAP applications, confirming that companies may file a MAP request to preserve treaty timelines while pursuing domestic remedies, with IRAS able to defer action until those proceedings conclude.
  • Implication: These refinements signal IRAS’s intention to make MAP more accessible and efficient while ensuring that cases are properly substantiated from the start. Companies should prepare comprehensive MAP filings early, given the reduced reliance on the pre-filing meeting, and use protective MAP applications to safeguard their treaty rights where domestic disputes may delay resolution.

5. Pass-Through Costs and Documentation:

• Strict Pass-Through Costs:
  • IRAS builds on the TPG7 framework by stating that an invoice alone is not sufficient to evidence a strict pass-through arrangement; some form of written agreement or correspondence is required to show that the benefiting related party is legally or contractually obliged to bear the cost. IRAS further requires taxpayers to articulate in their TP documentation why each item qualifies as a strict pass-through.
  • Implication: Companies relying on pass-through costs should put in place at least minimal written support (e.g. email exchanges or short service confirmations) and ensure their TP documentation explains how each cost meets IRAS’s criteria.

6. OECD Pillar Two:

• Safe Harbour (Simplified Approach):
  • A headline addition in TPG8 is the pilot of an OECD “Amount B” safe harbour for qualifying distribution transactions. From 1 January 2026 through 31 December 2028, Singapore taxpayers may elect a Simplified and Streamlined Approach (SSA) for base-distribution activities. Under SSA, a prescribed return on sales (ROS) replaces detailed TP benchmarking. The tested distributor must meet strict conditions. This pilot signals IRAS’s intent to align with global BEPS 2.0 reforms and to reduce TP compliance for routine distributors. However, it remains optional and narrowly scoped.
  • Implication: Eligible groups should carefully evaluate SSA: it can greatly simplify their TP process, but they must still comply with Singapore’s documentation rules and meet all conditions. IRAS explicitly notes that double taxation can arise if another jurisdiction rejects the SSA price and points to MAP as the dispute resolution mechanism.

 

CONCLUSION

TPG8 offers a mix of relief and reinforcement. On one hand, IRAS has eased compliance for straightforward arrangements, notably routine domestic loans and simplified documentation, and has made the MAP process more accessible, likely in response to industry feedback. On the other hand, the guidelines underscore substance over form through tighter guidance on capital transactions and strict pass-through cost.

Taxpayers should carefully review their intercompany policies in light of TPG8: updating loan pricing and documentation practices and ensuring solid characterisation analyses. Proactive compliance and thorough documentation will remain critical to minimize audit risk under Singapore’s evolving transfer pricing regime.

For further guidance on how these changes may affect your business, please contact Barbara Voskamp or Anne Klaassen.

 

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¹Please refer to our previous article on Comprehensive Updates and Strategic Implications for Businesses.