In February of this year, the OECD agreed on a new framework for
the implementation of the BEPS Project and invited all interested
countries to join as Associates to develop international standards
related to BEPS and to review and monitor the implementation of the
whole BEPS package. Every country that participates in the
framework as a BEPS Associate will be on an equal footing with the
OECD and G20 countries in the OECD's Committee on Fiscal
Affairs in reviewing and monitoring the implementation of the BEPS
The OECD also stated that the framework's mandate will focus
on the review of the implementation of the four BEPS minimum
standards, in the areas of harmful tax practices, tax treaty abuse,
Country-by-Country Reporting and improvements in cross-border tax
On 16 June 2016, Singapore announced that it will join the
framework for the implementation of the BEPS Project.
Transfer Pricing Perspective
The Base Erosion and Profit Shifting (BEPS) Action Plan has
devoted considerable effort on transfer pricing documentation, as
detailed in Action Plan 13. Under these guidelines, which was
finalised in October 2015, a three-tiered approach should be
applied to transfer pricing documentation as follows:
A Master file – The Master file
will provide tax administrations with high-level global information
regarding the overall global business and transfer pricing policies
of the Multinational Enterprises (MNEs) that are adopted by the
Group for each category of related party transaction.
A Local file – A Local file is
akin to more transactional transfer pricing documentation where
information on related party transactions, the transfer pricing
method and third party transactions are included.
("CbCR") – requiring tax jurisdiction wise
allocation of income, taxes paid, economic activity and taxes
accrued on an annual basis, in a previously set format, for each
tax jurisdiction in which they do business.
Though all MNEs are meant to prepare the Master file and Local
file, the CbCR is only required provided the Group's revenue
meets the revenue threshold.
In line with these changes in transfer pricing documentation
guidelines and as a BEPS Associate, the IRAS has committed to
implement CbCR for financial years beginning on or after 1 January
2017 for multinational enterprises whose ultimate parent entities
are in Singapore and whose group turnover exceed S$1,125
These enterprises are required to file the CbCRs with the IRAS
within 12 months from the last day of their financial year. IRAS
will then exchange these CbCRs with jurisdictions that Singapore
has entered into bilateral agreements with for automatic exchange
of CbCR information, having established that they meet the
First, these jurisdictions have a
strong rule of law and can ensure the confidentiality of the
information exchanged and prevent its unauthorised use.
Second, there must be reciprocity in
terms of the information exchanged.
The exchange of CbCRs will provide tax administrations a
complete understanding of the way in which MNEs structure their
operations by providing key information such as location and type
of economic activities undertaken by each entity within the MNE
group and the taxes paid.
Further guidance from the Inland Revenue Authority of Singapore
on the exact implementation of CbCR processes are expected by
This is a much awaited and much expected development, given the
current scrutiny that other tax jurisdictions (e.g., Australia)
have placed on transactions with Singapore based taxpayers. As a
BEPS Associate, it is now clear that Singapore will actively work
with other jurisdictions in the implementation and monitoring phase
of the BEPS Project.
By embracing CbCR, the Ministry of Finance and IRAS have
demonstrated alignment with BEPS Action Plan 13. However, our
current documentation rules do not explicitly detail the three
tiered approach as stated in Action Plan 13. Specifically, where
the group revenue thresholds are not met, Singapore-based taxpayers
are still required to prepare the Masterfile and Local files for
various entities, in line with local requirements. We would
therefore advice Singapore-based taxpayers to review the status of
transfer pricing documentation to ensure compliance with both the
Singapore Transfer Pricing Guidelines as well as Action Plan
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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