On 9 November 2020, the Inland Revenue Authority of Singapore (IRAS) published an e-Tax guide titled: GST: Transfer Pricing Adjustments. The guide explains the GST treatment for adjustments on the transfer prices of transactions between related parties.
Generally, at the year-end closing of its accounts, a company may make transfer pricing (TP) adjustments to arrive at the arm’s length outcome. This exercise may indicate that the company has understated or overstated the value of the supply or import of goods or services for GST purposes. Therefore, the company may be required to make certain GST adjustments.
Where a supply exists (consideration is received in return for the provision of goods or services) and a TP adjustment is made, a corresponding GST adjustment is required. The TP adjustment could:
Generally, a company may need to make a corresponding GST adjustment where the TP adjustment results in:
To ease business compliance, the Comptroller of GST will waive the requirement for GST adjustments under the circumstances stated below, regardless of an increase or decrease in transfer prices:
In summary, fully taxable GST-registered businesses that are entitled to full input tax credits will not be required to make GST adjustments arising from TP adjustments as the GST adjustments would not have an overall tax impact. Partial exempt businesses may still adopt the concession provided the conditions stated above are met.
Chin Sien Eu
Shy Zing Ng