Indicative margins for related party loans
IRAS has introduced an indicative margin which taxpayers can apply on each related party loan not exceeding S$15 million as tabulated in this table:
Related party loan not exceeding S$15 million obtained or provided during the period 1 January 2017 to 31 December 2017 – Indicative margin is + 250 bps (2.50%)
IRAS will update the indicative margin at the beginning of each calendar year.
The indicative margin is not mandatory. It gives taxpayers an alternative to performing detailed transfer pricing analysis in order to comply with the arm’s length principle for their related party loans.
If taxpayers choose to apply the indicative margin, they will apply the indicative margin on the appropriate base reference rate selected for the related party loan.
If taxpayers choose not to apply the indicative margin or if it is not applicable to them, they will have to apply an interest rate in line with the arm’s length principle and maintain contemporaneous transfer pricing documentation.
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