TP IT-SG-AU Comparation
26 October 2023
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| ITALY TRANSFER PRICING SUMMARY | SINGAPORE TRANSFER PRICING SUMMARY | AUSTRALIA TRANSFER PRICING SUMMARY |
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| Companies opting for TP documentation (Master File, Country specific documentation) must file it for each fiscal year by the time of the tax return. The Master File and Country Specific Documentation (Local File) must be signed by the legal representative or by a delegate representing the taxpayer by electronic signature with a time stamp to be put by the date of presentation of the tax return. | With effect from the year of assessment 2019 (i.e. financial year 2018), taxpayers with gross revenue from their trade or business exceeding SGD 10 million must prepare transfer pricing documentation under section 34F of the Income Tax Act unless they are exempt from doing so. | Under the general rules pertaining to transfer pricing, taxpayers may on a voluntary basis prepare transfer pricing documentation (with details of comparables and transfer pricing policies) to argue they have a Reasonably Arguable Position (RAP) and mitigate any administrative penalties that may apply in the event the Commissioner amends an assessment. Subdivision 284-E of Schedule 1 to the Tax Administration Act 1953 sets out the transfer pricing documentation requirements an entity would need to meet for penalty mitigation purposes. |
| The arm’s length principle Article 110, para. 7 of the Consolidated Law on Income Taxes (also referred to as Income Tax Code) incorporates into the law the arm’s length principle set forth by Article 9 of the OECD Model Tax Convention as follows: “Items of income arising from transactions with non-resident companies which directly or indirectly control the enterprise, are controlled by it or are controlled by the same company controlling the enterprise, are determined based on the conditions and prices which would have been agreed between independent parties operating on an arm’s length basis and in comparable circumstances.” Ministerial Decree of 14 May 2018, Article 1: “This decree, taking into account international best practices, provides guidelines for the application of the provisions included in Article 110, paragraph 7, of the Consolidated Law on Income Taxes, referred to in Presidential Decree No. 917 of 22 December 1986 (hereafter "TUIR"), for the sake of compliance with the arm’s length principle contained therein.” | The arm’s length principle A reference to the arm’s length principle is provided under section 34D of the Singapore Income Tax Act. | The arm’s length principle A reference to the arm’s length principle is provided under The Income Tax Assessment Act 1997 (ITAA 1997), Subdivision 815. |
| Transfer Pricing Guidelines The Ministerial Decree dated 14 May 2018, in setting out the general guidance for the proper application of the arm’s length principle established by law in Article 110, paragraph 7, of the Income Tax Code, makes explicit reference to the OECD Transfer Pricing Guidelines and to the OECD Final Report on BEPS Actions 8-10 as well. | Transfer Pricing Guidelines Singapore has its own Transfer Pricing Guidelines, which largely follow the key principles laid down in the OECD Transfer Pricing Guidelines and mention that Singapore generally takes guidance from the OECD Transfer Pricing Guidelines. The Singapore Transfer Pricing Guidelines are outside the domestic legislation for transfer pricing and provide guidance to the Singapore taxpayers on complying with the arm’s length principle when transacting with their related parties. In addition, the Singapore Transfer Pricing Guidelines laid down expectations and practices that are specifically relevant to the Singapore taxpayers. For example: • The process to observe when Singapore taxpayers make an application for advance pricing arrangement and mutual agreement procedure. • The 5% mark-up for routine support services and the indicative margin for related-party loans not exceeding SGD 15 million which Singapore taxpayers can choose to apply. • The circumstances under which year-end true up adjustments made by Singapore taxpayers are allowed under the domestic tax law. | Transfer Pricing Guidelines Revisions made to Australia’s taxation laws in 2012 and 2013, namely in the form of subdivisions 815-A, 815-B and 815-C of the Income Tax Assessment Act 1997, resulted in closer alignment of our legislation with the application of the arm’s length principle as described in the OECD guidelines. The legislation specifically provides that for the purposes of determining the effect the legislation has in relation to an entity, the arm’s length conditions should be identified so as best to achieve consistency with the OECD Transfer Pricing Guidelines. For years commencing on or after 1 July 2017, Australia’s transfer pricing legislation has been amended to specifically reference the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by the Council of the Organisation for Economic Cooperation and Development and last amended on 19 May 2017 (TPG). |
| Related parties Art. 110 para. 7 of the Income Tax Code, as amended in June 2017, refers to transactions that occurred between an Italian enterprise and non-resident companies that: “directly or indirectly control the Italian enterprise, or are controlled by it, or are controlled by the same company controlling the Italian enterprise”. The Decree of the Minister of Economy and Finance dated 14 May 2018 provides for the following details: (a) “associated enterprises” means an enterprise resident in the Italian territory as well as non-resident companies where: 1. one of them participates directly or indirectly in the management, control or capital of the other, or 2. the same person participates directly or indirectly in the management, control or capital of both enterprises; (b) “participation in the management, control or capital” means: 1. a participation of more than 50% in the capital, voting rights or profits of another enterprise; or 2. the dominant influence over the management of another enterprise, based on equity or contractual constraints. | Related parties The definition of related parties is provided under section 13(16) of the Singapore Income Tax Act as follows: “Related party”, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person, directly or indirectly, are under the control of a common person. There are no control or ownership thresholds provided in the Singapore Income Tax Act for purpose of determining related party under section 13(16). | Related parties Australia’s transfer pricing legislation does not provide a definition of related parties. Australia’s transfer pricing legislation is applicable if an Australian entity gets a tax benefit in Australia from non-arm’s length cross-border conditions, regardless of whether the parties are related to one another. There are no control or ownership thresholds for the legislation to apply. However, a definition of international related parties is contained in the ATO’s instructions for completing the International Dealings Schedule (IDS). An IDS is required to be lodged where a taxpayer has entered into certain international dealings or arrangements. The term as per the IDS instructions includes: - any overseas entity or person who participates directly or indirectly in your management, control or capital - any overseas entity or person in respect of which you participate directly or indirectly in the management, control or capital - any overseas entity or person in respect of which persons who participate directly or indirectly in its management, control or capital are the same persons who participate directly or indirectly in your management, control or capital. |
| Transfer Pricing Methods TP methods, specifically the methods recognized by the OECD, are described in Article 4 of the Ministerial Decree of May 14, 2018. According to para. 5, taxpayers may apply a method other than CUP, Resale Price, Cost Plus, TNMM and Profit Split only if they can demonstrate that: i) none of those methods could be applied with reliable results to determine the pricing of a controlled transaction on the basis of the arm’s length principle; and ii) such different method produces a result consistent with what independent enterprises would be expected to obtain in carrying out comparable uncontrolled transactions. The most appropriate method must be applied. | Transfer Pricing Methods The domestic legislation doesn’t provide for transfer pricing methods to be used in respect of transactions between related parties, but the Singapore Transfer Pricing Guidelines provide guidance on selecting the most appropriate method to determine the arm’s length price for a related party transaction. In addition, Singapore takes guidance from the OECD Transfer Pricing Guidelines. Singapore published the Transfer Pricing Guidelines (Special Topic) – Commodity Marketing and Trading Activities on 24 May 2019. The Guidelines are outside the domestic legislation for transfer pricing and analyse the economic value of taxpayers’ commodity marketing and trading activities in Singapore and help taxpayers to comply with the arm’s length principle and transfer pricing documentation requirement when such activities are carried out with their related parties. The Guidelines make reference to the guidance contained in paragraphs 2.18-2.22 of the OECD Transfer Pricing Guidelines. | Transfer Pricing Methods Australia’s legislation does not specify any particular method to be used in respect of transactions between related parties. Paragraph 815-125(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that “in identifying the arms-length conditions use the method or combination of methods that is the most appropriate and reliable having regard to all relevant factors”. The paragraph notes that possible methods include the methods set out in the documents in section 815-135 ITAA1997 i.e. OECD TPG (see reference above at question 2 to relevant guidance materials). Therefore, the methods outlined in the OECD TPG are used. Australia seeks to adopt the method that is the most appropriate and reliable or best suited to the circumstances of each particular case. Australia’s legislation states “In identifying the *arm's length conditions, use the method, or the combination of methods, that is the most appropriate and reliable, having regard to all relevant factors, including the following: a) the respective strengths and weaknesses of the possible methods in their application to the actual conditions; b) the circumstances, including the functions performed, assets used and risks borne by the entities; c) the availability of reliable information required to apply a particular method; d) the degree of comparability between the actual circumstances and the comparable circumstances, including the reliability of any adjustments to eliminate the effect of material differences between those circumstances.” The Australian legislation also references the TPG with respect to selecting and applying the most appropriate method (see also reference above at question 2 to relevant guidance materials). |
| Comparability Analysis The definition of comparability as described in Article 3 of the Ministerial Decree of May 14, 2018 is the same as that outlined in Chapter III of the OECD TPG. Article 6 of the Ministerial Decree dated 14 May 2018 deals with the arm’s length range. The range of figures resulting from the financial indicator selected to apply the most appropriate method shall be considered at arm’s length where the figures reflect a number of uncontrolled transactions, each of which is equally comparable to the controlled transaction, following the comparability analysis. A controlled transaction is deemed to have been carried out complying with the arm’s length principle, if the relevant financial indicator is within the abovementioned range referred to in paragraph 1 of this Article. Where the financial indicator of a controlled transaction is not within the arm’s length range, the tax administration shall adjust it so that it falls within the range, without prejudice to the right of the associated enterprise to produce evidence that the controlled transaction satisfies the arm’s length principle, as well as to the power of the tax administration to disregard such evidence providing an adequate statement of reasons. | Comparability Analysis The Singapore Transfer Pricing Guidelines provide guidance on comparability analysis. In addition, Singapore takes guidance from the OECD Transfer Pricing Guidelines. As far as possible, taxpayers are obliged to use local comparables in their comparability analysis. When taxpayers are unable to find sufficient reliable local comparables, they may expand their search to regional comparables. Taxpayers are to include the basis of selecting the comparables in their transfer pricing documentation. It is generally difficult to determine the specific arm’s length price or margin. Thus, the use of a range of prices or margins is acceptable and the Singapore Transfer Pricing Guidelines provide the following guidance: A wide range of prices or margins may suggest the existence of comparability issues or defects that cannot be identified and/ or quantified in the comparability analysis and are therefore not adjusted. In such a situation, outliers such as the minimum and maximum data points should be excluded. To enhance the reliability of the comparability analysis, taxpayers could apply the interquartile range to determine the arm’s length remuneration. A full range (i.e. from minimum to maximum) may occasionally be considered as the arm’s length price range when all the points in the range can be established to be equally reliable. An example of such a circumstance is where the taxpayer has applied the CUP method and demonstrated that all observations in the full range are equally reliable. Comparability adjustments are to be made where appropriate to increase the reliability of the results. The Singapore Transfer Pricing Guidelines provide guidance on comparability adjustments. | Comparability Analysis Australia adopts the guidance on comparability analysis in its transfer pricing legislation. Australia’s legislation states: “In identifying comparable circumstances for the purpose of this section, regard must be had to all relevant factors, including the following: (a) the functions performed, assets used and risks borne by the entities; (b) the characteristics of any property or services transferred; (c) the terms of any relevant contracts between the entities; (d) the economic circumstances; (e) the business strategies of the entities. See also reference above at question 2 to relevant guidance materials. All things being equal, the ATO prefers to use domestic comparables where the Australian entity is the tested party as these would generally provide closer comparability especially in terms of economic circumstances. However, this all depends on the particular facts and circumstances and the availability of reliable data. Australian domestic legislation at paragraph 815-125 (2) provides that “in identifying the arms-length conditions use the method or combination of methods that is the most appropriate and reliable having regard to all relevant factors.” Where appropriate the use of an arm’s length range and/or statistical measure for determining arm’s length remuneration may be used. See also reference above at question 2 to relevant guidance materials. Australia’s domestic legislation does not mandate quantitative comparability adjustments. The legislation provides in paragraph 815-125 (4) ITAA 1997 that where there are material differences between actual and comparable circumstances, it will be sufficient for the purposes of comparability if reasonably accurate adjustments can be made to eliminate the effect of the difference. |
| Transactions involving intangibles Italy’s TP domestic legislation or regulations does not contain specific guidance on the pricing of controlled transactions involving intangibles. Arm’s length principle applies. Ministerial Decree of 14 May 2018 refers in the Preamble to the Final Report on Actions 8-10 of the OECD/G20 BEPS Project and to the OECD Guidelines approved by the OECD Council on 10 July 2017. Also, it establishes in Art. 9 that any additional implementing arrangement shall be provided for by one or more Commissioner Decision, taking into account the provisions of the OECD Guidelines as regularly updated. As for transactions involving intangibles, references to the OECD TPG are also present in patent box regime (see the answer to question 14). | Transactions involving intangibles Section 19B of the Singapore Income Tax Act provides that the capital expenditure incurred for intellectual property rights for the purpose of writing-down allowances must be based on open-market price. Moreover, section 34D of the Singapore Income Tax Act requires transactions between related parties to be conducted at arm’s length. | Transactions involving intangibles There is no specific guidance in Australia’s transfer pricing legislation in respect to the pricing of controlled transactions involving intangibles. However, as Australia’s transfer pricing legislation incorporates the TPG through section 815-135 ITAA 1997, guidance contained in the TPG relating to the pricing of controlled transactions involving intangibles will be applicable. See reference above at question 2 to relevant guidance materials. Key Australian income tax rules relating to the tax treatment of intangibles (both specifically and more generally) include: rules relating to uniform capital allowances (depreciation) – Division 40 ITAA 1997 tax consolidation rules – Part 3-90 ITAA 1997 capital gains tax rules – Part 3-1 ITAA 1997 research and development rules – Division 355 ITAA 1997 thin capitalisation rules – Division 820 ITAA 1997. |
| HTVI The domestic legislation doesn’t provide for transfer pricing rules or special measures regarding hard to value intangibles. Italy introduced in 2015 an IP optional regime (“patent box”) built on the nexus approach, in accordance with BEPS Action 5. Explicit reference to the OECD TPG is provided by law. Law provision establishes that the intangible related income is to be determined based on the principles and methodologies recommended by the OECD TPG. | HTVI The domestic legislation doesn’t provide for transfer pricing rules or special measures regarding hard to value intangibles. The Singapore Income Act (section 19B) provides that the capital expenditure incurred for intellectual property rights for the purpose of writing-down allowances must be based on open-market price. In the event that the intellectual property rights are HTVI, Singapore would take guidance from Section D.4 of the revised Chapter VI of the OECD Transfer Pricing Guidelines and the Annex to Chapter VI on the guidance for tax administrations on the application of the approach to HTVI. | HTVI Australia’s domestic legislation does not specifically provide for transfer pricing rules or special measures regarding hard to value intangibles. However, as Australia’s transfer pricing legislation incorporates the TPG through section 815-135 ITAA 1997, guidance contained in the TPG relating to hard to value intangibles will be relevant. See reference above at question 2 to relevant guidance materials. |
| Statute of limitations applicable to tax assessments Italy has a statute of limitation of seven years to make assessments with additional tax. The statute of limitation applies regardless of the kinds of transactions. | Statute of limitations applicable to tax assessments Singapore has a statute of limitation of four years to make assessments with additional tax. The statute of limitation applies regardless of the kinds of transactions. There is no statute of limitation to make assessments to discharge or reduce tax. | Statute of limitations applicable to tax assessments Australia has a statute of limitation of four years to make assessments with additional tax. |
| Guidance on intra-group services transactions Italian transfer pricing domestic legislation does not contain specific guidance on intra-group services transactions. The OECD TPG are followed. | Guidance on intra-group services transactions The guidance specific to intra-group services transactions is provided in the Singapore Transfer Pricing Guidelines. | Guidance on intra-group services transactions Australia’s domestic transfer pricing legislation does not provide specific guidance on intra-group services transactions. However, as Australia’s transfer pricing legislation incorporates the TPG through section 815-135 ITAA 1997, guidance contained in the TPG relating to intra-group services would be relevant. Australia’s transfer pricing rules are self-executing and the Tax Commissioner in Australia does not have a general power to waive the operation of the underlying statutory test. However, the Commissioner’s ‘general power of administration’ can be applied to inform the Commissioner’s approach to compliance. Australia’s income tax rules (outside transfer pricing rules) contain a number of provisions that are relevant for the tax treatment of transactions involving services. |
| Low value-adding intra-group services Article 7 of the Ministerial Decree of 14 May 2018 regulates the simplified approach for low value-adding intra-group services, as it is described in BEPS Actions 8-10, without thresholds. This approach is consistent with BEPS Actions 8-10. When applying the simplified approach for low value-adding intra-group services, the companies are required to provide specific information in the Country File (Country specific documentation). | Low value-adding intra-group services Taxpayers can choose to apply the 5% cost mark-up for routine support services as an alternative to performing detailed transfer pricing analysis provided: a) The services fall within the list of routine support services; b) The service provider does not offer the same routine support services to an unrelated party; and c) All costs including direct, indirect and operating costs relating to the routine support services performed are taken into account in computing the 5% cost mark-up. In the event the service does not fall within the list of routine support services as required under (a) above, taxpayers may apply the 5% profit mark-up under the OECD simplified approach on low value-adding intra-group services in Chapter VII of the OECD Transfer Pricing Guidelines provided: a) The service met the definition of low value-adding intra-group services for the OECD simplified approach; b) The service is not specifically excluded as low value-adding intra-group service for the OECD simplified approach; c) The tax authority of the other party to the service has similarly adopted the OECD simplified approach; d) The service provider does not offer the same service to an unrelated party; and e) All costs including direct, indirect and operating costs relating to the service performed are taken into account in computing the 5% profit mark-up. | Low value-adding intra-group services Australia apply simplified transfer pricing keeping options to low value adding intra-group services. |
| Cost Contribution and Cost-pooling Agreements TP domestic legislation does not provide any specific guidance on cost contribution arrangements or cost-pooling arrangements. The OECD TPG are followed. | Cost Contribution and Cost-pooling Agreements The guidance specific to cost contribution arrangements is provided in the Singapore Transfer Pricing Guidelines. Reference is made to Chapter VIII of the OECD Transfer Pricing Guidelines. A service provider may charge its related party for its proportionate share of the cost of services without mark-up under a cost-pooling arrangement on the conditions that: a) Each participant’s share of the costs must be borne in the form of cash or other monetary contributions; b) The services are not provided to any unrelated party; c) The provision of services to the related parties is not the service provider’s principal activity, i.e. the costs of providing the services do not exceed 15% of the service provider’s total expenses; d) The services fall within the list of routine support services; and e) There is transfer pricing documentation for the arrangement. | Cost Contribution and Cost-pooling Agreements Australia’s domestic legislation does not specifically provide for transfer pricing rules or special measures regarding cost contribution agreements. However, as Australia’s transfer pricing legislation incorporates the TPG through section 815-135 ITAA 1997, guidance contained in the TPG relating to cost contribution agreements would be relevant. See reference above at question 2 to relevant guidance materials. |
| Centralised Activities in Multinational Enterprise Groups TP domestic legislation does not provide any specific guidance on Centralised Activities in Multinational Enterprise Groups. | Centralised Activities in Multinational Enterprise Groups Singapore issued the Transfer Pricing Guidelines (Special Topic) – Centralised Activities in Multinational Enterprise Groups on 19 March 2021. The Guidelines discuss the economic value contributions of centralised activities in Singapore and their importance to a multinational enterprise group. The Guidelines also provide guidance on how to analyse such activities carried out in Singapore between related parties, the factors that may affect the transfer price for these activities and the transfer pricing methods that may be appropriate. | Centralised Activities in Multinational Enterprise Groups TP domestic legislation does not provide any specific guidance on Centralised Activities in Multinational Enterprise Groups. One aspect of the ATO's approach to monitor these arrangements is a risk-based analysis in Practical Compliance Guidance (PCG) 2017/1, which covers the compliance approach to transfer pricing (TP) issues related to centralised operating models involving procurement, marketing, sales and distribution functions. These centralised operating models have been referred to as 'hubs'. The PCG is a general statement on the issue, and also includes three schedules: Schedule 1 covers offshore marketing hubs; Schedule 2 targets offshore non-core procurement arrangements; and Draft Schedule 3 focuses on offshore shipping service hubs. |
| Guidance specific to financial transactions Italian domestic legislation does not contain specific transfer pricing guidance on financial transactions. The OECD TPG are followed. | Guidance specific to financial transactions The guidance specific to financial transactions is provided in the Singapore Transfer Pricing Guidelines. Reference is made to Chapter X of the OECD Transfer Pricing Guidelines. | Guidance specific to financial transactions Australia’s domestic transfer pricing legislation does not provide specific guidance on financial transactions. Australia’s transfer pricing legislation incorporates the TPG through section 815135 ITAA 1997. See reference above at question 2 to relevant guidance materials. As the current wording of the law only refers to the TPG as amended on 19 May 2017, Chapter X of the TPG, covering Financial Transactions (published 11 February 2020), is not included as part of the prescribed guidance materials. Future legislative amendments will be required in order to include Chapter X in the guidance materials. Whilst Australia has not implemented the recommendations in BEPS Action 4, Australia has existing thin capitalisation provisions in Division 820 of the ITAA 1997. Australia’s income tax rules (outside transfer pricing rules) contain a number of additional provisions that are relevant for the tax treatment of financial transactions. Taxation Ruling TR 2020/4 deals with the application of the arm’s length debt test contained in the thin capitalisation rules in Division 820 of the ITAA 1997. The ATO has also released various Practical Compliance Guidelines that provide transparency for taxpayers on the risk assessment framework adopted by the ATO in forming its compliance approach on particular issues: Practical Compliance Guideline PCG 2020/7 provides guidance and a risk assessment framework that outlines Australia’s compliance approach to an application of the arm’s length debt test. Practical Compliance Guideline PCG 2017/4 outlines Australia’s approach to taxation issues associated with cross-border related party financing arrangements and related transactions. |
| Transfer Pricing Documentation The Italian legislation or regulation do not require the taxpayer to prepare Master File and Country Specific Documentation (Local File) as an obligation. Master File and Country Specific Documentation (Local File) are optional for taxpayers. Taxpayers filing proper TP Documentation will benefit of so called “penalty protection” in case of upward adjustments. In this case, Article 26 of the Law Decree No. 78 of May 31, 2010 implemented – with amendments – by Law No. 122 of 30 July 2010 introduced a penalty protection regime for companies filing proper TP documentation. The content of Master File and Country Specific Documentation (Local File) - dealt with in the implementation guidance, contained in the Decision of the Commissioner of the Italian Revenue Agency dated 23 November 2020 – is substantially identical to Annex I and II to Chapter V of the TPG. The Italian legislation requires the taxpayer to prepare transfer pricing documentation regarding Country-by-Country report correspondent to Annex III to Chapter V of the TPG. Law no. 208, dated 28 December 2015 introduced Country-by-Country report. Ministerial Decree dated 23 February 2017 provides for regulations for CbCR, in compliance with the EU Council Directive 2016/881/UE dated 25 May 2016. The Decision of the Commissioner of the Italian Revenue Agency dated 28 November 2017 provides for detailed implementation guidance of CbCR. The taxpayer shall submit the TP Documentation to the tax authorities in electronic form within 20 days upon request. The Master file and the Country Specific Documentation must be drafted in Italian. However, the Masterfile can be submitted in English. CbCR is mandatory for eligible taxpayers, as defined in the Ministerial Decree of 23 February 2017. It must be filed for each reporting fiscal year within 12 months from the last day of the reporting fiscal year. For companies opting for TP documentation (Master File, Country specific documentation - please see also answer to question 21) a simplified approach is provided for small and medium-sized enterprises (SMEs) with reference to the information provided in the Country File (Country specific documentation): SMEs are entitled not to update specific information for two fiscal periods following the period which the documentation relates to, in case the comparability analysis is based on publicly available information sources, and insofar as the comparability factors do not incur substantial changes during the above mentioned taxable periods. Companies are qualified as “small or medium-sized enterprises” in the event their total turnover or revenue does not exceed the threshold of fifty million Euros. Notwithstanding this definition, entities do not fall within this definition should they control directly or indirectly – or should they be controlled directly or indirectly by - an entity not qualified as a “small or medium sized enterprise”. As for CbCR legislation, the Ultimate Parent Entity, resident in Italy, of a MNE Group having total consolidated group revenue of not less than EUR 750 000 000 must file CbCR. | Transfer Pricing Documentation The Income Tax (Transfer Pricing Documentation) Rules 2018 stipulate the information taxpayers must provide in their transfer pricing documentation. The information to be provided by the taxpayers at entity level and group level is largely similar to the OECD Local file and Master file respectively. Transfer pricing documentation must be prepared no later than the time for the making of the tax return and must be submitted within 30 days upon request by the Inland Revenue Authority of Singapore (“IRAS”). The content of the transfer pricing documentation at entity level and group level is largely similar to the OECD Local file and Master file respectively. The transfer pricing documentation must be prepared in English or translated to English. The rules for transfer pricing documentation and exemption from transfer pricing documentation are provided in the Income Tax (Transfer Pricing Documentation) Rules 2018. Guidance on preparing transfer pricing documentation is provided in the Singapore Transfer Pricing Guidelines. Taxpayers who are not required to prepare transfer pricing documentation under section 34F of the Income Tax Act are encouraged to prepare them following the guidance in the Singapore Transfer Pricing Guidelines. Exemption from transfer pricing documentation applies to related party domestic transaction subject to the same tax rate, related party domestic loan where the lender is not in the business of borrowing and lending money, related party loan not exceeding SGD 15 million where taxpayer applies the indicative margin (see item 26 below), routine support services on which taxpayer applies the 5% cost mark-up (see item 16 above), related party transaction covered by an advance pricing arrangement and related party transaction not exceeding certain value. The exemption is prescribed in the Income Tax (Transfer Pricing Documentation) Rules 2018. Guidance is provided in the Singapore Transfer Pricing Guidelines. | Transfer Pricing Documentation The taxpayer does not lodge these documents but is required to prepare these by the time they lodge the relevant Australian income tax return. Administrative guidance TR 2014/8 - Income tax: transfer pricing documentation and Subdivision 284-E of the Taxation Administration Act 1953, sets the ATO’s views about how the provisions apply. Australia’s CbC reporting provisions are contained in Subdivision 815-E ITAA 1997. All CbC reporting statements, including the master file, the local file, and the CbC report, must be lodged within 12 months after the end of the reporting period to which they relate. The statements need to be lodged electronically in an XML Schema format and in English. Australia is a signatory to the Multilateral Competent Authority Agreement enabling the exchange of CbC reports (excluding the master file and local file) with tax authorities of other signatory jurisdictions. The International Dealings Schedule forms part of the income tax return and must be lodged together with the income tax return when it falls due. Additionally, taxpayers may on a voluntary basis prepare transfer pricing documentation to substantiate their compliance with the arm’s length principle (including details of comparables and transfer pricing policies) beyond the minimum statutory requirements. CbC reporting entities are able to request an exemption with respect to the requirement to lodge a CbC report, master file and local file. Exemptions are considered on a case-by-case basis. For example, an exemption may be granted with respect to the CbC report if the ATO concludes that there is no other jurisdiction that may be expecting to receive a CbC report from Australia in relation to an entity (Australia’s CbC reporting regime includes within its scope entities that do not have offshore operations). Also, an entity may be granted an exemption with respect to the local file or master file if the ATO concludes that there is no or limited transfer pricing risk based on the absence of cross border related party dealings. As part of the general transfer pricing record keeping rules, Subdivision 284-E of Schedule 1 to the Taxation Administration Act 1953 applies (see response to question 21). Documenting transfer pricing arrangements to meet all of the requirements of Subdivision 284-E of Schedule 1 to the Taxation Administration Act 1953 (TAA) may impose an administrative burden for some taxpayers exhibiting low risk arrangements. To assist such taxpayers, simplified transfer pricing record keeping options have been developed to minimise the record-keeping burden for eligible taxpayers. See response to question 26 for further details. |
| Specific transfer pricing penalties and/or compliance incentives regarding transfer pricing documentation For companies opting for TP documentation (Master File and Country specific documentation) penalty protection is guaranteed if the documentation requirements are met (i.e. the TP documentation is proper, in the meaning that it provides the tax auditors with the data and information necessary to perform an analysis of the transfer pricing applied, with a specific accurate description of the material transactions and comparability analysis, including a functional analysis, regardless of the fact that the transfer pricing method or the selection of comparable transactions or enterprises adopted by the taxpayer are different from those identified by the tax authorities). | Specific transfer pricing penalties and/or compliance incentives regarding transfer pricing documentation Taxpayers which do not prepare transfer pricing documentation in accordance with section 34F of the Income Tax Act shall be liable to a fine not exceeding SGD 10,000. Where a transfer pricing adjustment is made by the IRAS on a taxpayer under section 34D of the Income Tax Act, the taxpayer is subject to a surcharge of 5% of the amount of the adjustment under section 34E of the Income Tax Act. The penalty and surcharge are effective from the year of assessment 2019 (i.e. financial year 2018). | Specific transfer pricing penalties and/or compliance incentives regarding transfer pricing documentation The failure of a CbC reporting entity to lodge the CbC report, master file or local file will attract significant penalties in Australia. Under the more generic transfer pricing record keeping rules – which applies to CbC reporting entities and those that are not - there are no specific sanctions for not preparing/ not filing transfer pricing documentation, but the general provisions in the tax law for not keeping, filing, and submitting documentation apply. See response to question 21 regarding compliance incentives in the form of penalty mitigation per Subdivision 284-E Taxation Administration Act 1953. Administrative statement penalties are doubled in the case of ‘Significant Global Entities’, which includes within its scope entities that qualify as ‘CbC reporting entities’ and those that have CbC reporting obligations under Australian domestic law. |
| Administrative Approaches to Avoiding and Resolving Disputes Resident taxpayers can request a unilateral corresponding adjustment to the Italian tax administration in case of a primary adjustment notified by another Country resulting in double taxation. In case of a foreign primary Transfer Pricing adjustment, the Italian Revenue Agency (IRA) can recognize a downward adjustment not only in execution of a Mutual Agreement Procedure but also upon formal request by the taxpayer. The newly introduced procedure allows Italian taxpayers to obtain a unilateral downward adjustment on their taxable income as a result of transfer pricing adjustment made by foreign tax authorities. The IRA evaluates whether the primary adjustment made by the other State is in accordance with the ALP, provided that a DTC is in force with the other State, allowing an adequate exchange of information. | Administrative Approaches to Avoiding and Resolving Disputes Taxpayers are to refer to the Singapore Transfer Pricing Guidelines and Singapore’s MAP profile for the process to follow if they wish to request for APA and MAP. Generally, an APA covers three to five future financial years (“covered period”) and no more than two prior years (“roll-back years”) provided there is no significant difference in the facts and circumstances for the covered period and the roll-back years. No roll-back year is allowed for unilateral APA. Singapore is participating in the OECD International Compliance Assurance Programme (ICAP) since 2021 to provide tax certainty to taxpayers. | Administrative Approaches to Avoiding and Resolving Disputes Australia has an APA program in place as part of our compliance strategy. The Commissioner of Taxation can enter unilateral APAs by virtue of the general administrative powers in sections 1-7 of the ITAA 1997. An authorised Competent Authority can enter a bilateral or multilateral APA under the MAP Article of the relevant tax treaty. For more information on the administration of the APA program please refer to PS LA 2015/4 Advanced Pricing Arrangements. |
| Safe Harbours and Other Simplification Measures TP domestic legislation does not provide any specific provision to safe harbours and other simplification measures. | Safe Harbours and Other Simplification Measures In addition to the 5% cost mark-up for routine support services mentioned above, from 1 January 2017, Singapore has put in place an indicative margin which taxpayers can choose to apply to each related party loan that does not exceed SGD 15 million at the time the loan is obtained or provided. Taxpayers would decide the appropriate base reference rate on which to apply the indicative margin to arrive at the interest rate. The purpose of the indicative margin is to ease taxpayers’ compliance effort in determining the credit margin for bearing the credit risk of default by the borrower. | Safe Harbours and Other Simplification Measures Australia already has a number of transfer pricing simplification measures that are subject to various thresholds, however the simplification measures do not constitute literal ‘safe harbours’ to the extent that they do not waive the application of the underlying statutory test. Intra-group services is one of the seven available simplified transfer pricing record keeping options. Guidance material for taxpayers in respect of how the simplification administrative measures can be utilised is published by the Commissioner in a Practical Compliance Guideline (PCG). There are seven available simplified transfer pricing keeping options: small taxpayers, distributors, low value adding intra-group services, low-level inbound loans, materiality, technical services, low-level outbound loans. Further detail is available in Practical Compliance Guideline PCG 2017/2 Simplified Transfer Pricing Record Keeping Options. |
| Year-end adjustments TP domestic legislation does not provide any specific provision to year-end adjustments. | Year-end adjustments Singapore will accept year-end adjustments made by taxpayers to ensure that their tax-reported results are consistent with the arm’s length prices stated in their transfer pricing analyses and policies when the following conditions are met: a) Taxpayers must have in place transfer pricing analyses and contemporaneous transfer pricing documentation to establish the arm’s length prices; b) Taxpayers should make the year-end adjustments symmetrically in the accounts of the affected related parties. This is to avoid double taxation or double non-taxation; and c) Taxpayers must make the adjustments before filing their tax returns. | Year-end adjustments TP domestic legislation does not provide any specific provision to year-end adjustments. |
| Attribution of Profits to Permanent Establishments The 2010 OECD Model Tax Convention version of Article 7 has been included in two Tax Treaties already in force and in a number of treaties under negotiation and/or ratification. Tax treaties that do not contain the AOA may also be interpreted dynamically, to the extent that it does not imply an infringement of the Treaty, given that the AOA is also provided for by domestic legislation. | Attribution of Profits to Permanent Establishments Singapore’s tax treaties do not contain the new version of Article 7 (OECD MTC 2010 and later). As such, Singapore does not apply the authorised OECD approach (“AOA”). When determining the profits attributable to a PE, Singapore applies the relevant tax treaty and the basic principle that the profits attributable to a PE are those that the PE would have derived if it were a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions (see paragraph 31 of the 2018 OECD Additional Guidance on the Attribution of Profits to Permanent Establishments), together with the guidance provided in the Singapore and OECD Transfer Pricing Guidelines. | Attribution of Profits to Permanent Establishments TP domestic legislation does not provide any specific provision to attribution of profits to permanent establishments. The Australian tax law does not recognise dealings between different parts of one entity. This means that only income from, and expenditure with, other entities can be allocated to PE. That is to say, Australia follows the Relevant Business Activity approach when attributing arm’s length profits to PEs, and specifically, notional transactions between the PE and the head office are not recognised as part of the attribution process. This approach is outlined in Taxation Ruling TR 2001/11. |
