The Inland Revenue Authority of Singapore (IRAS) has published the eighth edition of the Transfer Pricing Guidelines (TPG8) on November 19, 2025. This alert summarises the key changes and principles in TPG8 applicable to all businesses in Singapore with domestic and/or cross-border related party transactions.

The changes in the TPG8 are most relevant for groups with Singapore entities that use related party funding, treasury cash pooling, or centralised cost recharges. While IRAS has reduced transfer pricing compliance for certain domestic loans, the practical focus shifts to interest deductibility, remittance mechanics for outbound loans, and stronger governance around documentation declarations and strict pass-through costs.

1. Related Party Loan Transactions

Relief for Domestic Related Party Loans (Paragraphs 15.21 – 15.22)

A notable feature of TPG8 is the relaxation for domestic related party loans under specific conditions:

• The loan must be between Singapore tax-residents.
• Neither the lender nor the borrower should be in the business of borrowing and lending (i.e., not a financing/banking entity)[1].
• The loan must have been entered into on or after January 1, 2025.

Under the previous regime for such loans, taxpayers were obliged to adopt IRAS’ indicative margin or conduct an arm’s length analysis to determine interest rates for such loans. Under TPG8, taxpayers may apply IRAS’s indicative margin or conduct an arm’s length analysis to determine the interest rates.

TPG8 clarifies that IRAS will not impose a transfer pricing (TP) adjustment under Section 34D of the Singapore Income Tax Act (the Act) for such domestic loans. IRAS will also not request the parties to submit contemporaneous TP documentation, if applicable, in relation to such a loan. The parties’ claim for deduction of interest expense will be assessed under Section 14(1)(a) of the Act and subject to interest restriction, where appropriate.

For many groups with Singapore entities, this change means domestic intragroup financing can be simplified without Section 34D transfer pricing exposure, structured with greater flexibility and reduced compliance costs but it does not eliminate the direct tax question on interest deductibility.

Cross-Border Interest Free Related Party Loans (Paragraph 15.25)

For cross-border outbound related party loans where the taxpayer in Singapore is the lending party, IRAS has clarified that it will make TP adjustments only when interest is remitted into Singapore. This means that if the loan is interest-free, no TP adjustment will be made, since no interest is remitted. If the lending party has incurred interest expense to fund the loan, IRAS will disallow the interest expense as it is not incurred in the production of any income.

For cross-border inbound related party loan where the taxpayer in Singapore is the borrowing party and no interest is charged by the lending party, IRAS will not impute an arm’s length interest expense as it is not tax deductible and there will be no withholding tax liability since there is no interest payment to the foreign lending entity.

Annual Review of Related Party Loans (FAQ 7 in Appendix B of Section 6)

IRAS clarifies that taxpayers are required to review their loan transactions with related parties regardless of the tenor of the loan since the facts and circumstances in relation to the loans may change over time. Taxpayers should evaluate the impact on the interest rate, terms and conditions of the related party loan following any significant changes to the facts and circumstances, and document the outcomes of their review of the loan in the TP documentation. Some examples provided by IRAS are as follows:

• Determine whether the change involves refinancing. If refinancing is involved, the loan is treated as a new loan, which must be repriced.
• Consider whether an independent party under comparable circumstances would reprice the loan. The taxpayer may provide supporting evidence to show that repricing is not necessary, such as:
  • The taxpayer has third-party loans with similar terms and conditions to the related party loan, and the interest rates on those third-party loans are fixed for the entire tenor, with no option to adjust or renegotiate the terms.
  • The taxpayer can demonstrate that a change in collateral value does not affect the interest rate.
  • The taxpayer’s related party loan is a floating-rate loan where the interest rate is tied to a base reference rate plus a margin reflecting the borrower’s credit profile, and the taxpayer can show that economic changes are already reflected in the base reference rate while the margin remains appropriate because the borrower’s credit standing has not materially changed.

IRAS’s Position on the Tax Treatment of the Portion of the Loan Which Is Not Regarded as a Loan (Paragraph 15.10)

Where a Singapore taxpayer is the borrower, any interest expense attributable to the non-loan portion is not deductible. Where a Singapore taxpayer is the lender, the corresponding interest income remains taxable, unless there is an advance pricing agreement or Mutual Agreement Procedures (MAP) with the other jurisdiction.

Structuring of Debt or Equity Funding (Paragraph 15.12)

IRAS may disregard the funding arrangement if it is in connection with tax avoidance arrangement.

In practice, this is most relevant where instruments have equity like features, embedded return expectations, or commercial terms that cannot be supported as genuine debt, creating a risk where part of the principal is treated as non-loan in substance with asymmetric tax outcomes on interest deductions and taxable interest income.

2. Implementation of the Simplified and Streamlined Approach (SSA) for Baseline Marketing and Distribution Activities (Section 19)

The SSA will be implemented on a pilot basis from January 1, 2026, to December 31, 2028. When relying on the SSA, a taxpayer would no longer have to conduct a detailed TP analysis (benchmarking analysis) for each related party transaction arising from its marketing and distribution activities. The taxpayers can use a return on sales (ROS) approach as prescribed to determine the pricing of qualifying transactions and the same will be deemed to meet the arm’s-length standard. Although the SSA is treated as arm’s length in Singapore during the pilot period, IRAS notes that foreign tax authorities are not obliged to accept the SSA outcome, and any resulting double taxation may need to be resolved through MAP.

This will be most relevant for groups with Singapore distribution entities performing baseline marketing and distribution activities for related principals, where the administrative cost of recurring benchmarking is high and the Singapore entity’s profile is stable year on year.

3. Protective Mutual Agreement Procedures (Protective MAP) and Procedural Clarifications (Paragraphs 10.56, 10.57, 11.3, 11.8 and 11.12)

A protective MAP application protects the taxpayer from missing the MAP time limit while pursuing other actions, such as domestic legal remedies. Protective MAP is most useful where a taxpayer needs to preserve treaty time limits while considering objections or litigation, especially for cross border adjustments that create double taxation and cash tax timing issues.

In TPG8, IRAS provides guidance on how to apply for a protective MAP application. Taxpayers who have incurred audit adjustments with their overseas related parties have two options:

• If the taxpayer has initiated, or plans to initiate, domestic legal remedies, it may file a protective MAP application within the Double Taxation Agreement (DTA) time limit and request IRAS to defer the MAP review until further notice from the taxpayer.
• If the taxpayer has not decided on domestic legal remedies, it may submit a MAP application within the DTA time limit to commence MAP. If domestic remedies are later pursued, the taxpayer must inform IRAS, and the competent authorities will determine whether to suspend the MAP.

IRAS has finetuned the administrative procedures under the MAP process to enhance clarity and coordination. The revisions outline the information to be provided at least one month ahead of a pre-filing meeting and confirm that the foreign competent authority will be informed once a MAP application is received. The guidance also notes that a MAP resolution will be carried out only after the taxpayer accepts the outcome and the competent authorities exchange formal confirmations and closing communications.

4. Other Considerations

Strict Pass-Through Costs (Paragraph 14.22, 14.25)

IRAS has made the criteria for treating costs as strict pass-through more stringent, noting that invoices by themselves do not constitute adequate proof of a written agreement. Taxpayers are expected to maintain separate written evidence (such as contracts or documented correspondence) demonstrating that the related party receiving the benefit bears the legal or contractual responsibility for the costs. Taxpayers must explain in their transfer pricing documentation the justification for treating specific costs as strict pass-through and demonstrate that they act merely as paying agents without adding value.

In practice, groups relying on strict pass through should check that the pass-through nature is reflected in written terms such as an intercompany agreement, statement of work, or other written confirmation, rather than relying on billing invoices alone. The basis and calculation should also be clearly described in the local file narrative to support strict pass-through treatment.

Simplified TP Documentation (Paragraph 6.35)

If a taxpayer relies on qualifying past TP documentation without making a declaration, this will not be regarded as having prepared a simplified TP documentation. Accordingly, the taxpayer would not satisfy the requirements under Section 34F of the Act. In practice, tax and finance teams should build the declaration step into the annual compliance calendar and ensure the qualifying prior year documentation is clearly referenced and retrievable, as a process miss could undermine reliance on the simplified regime.

Capital Transactions (Paragraph 8.10)

IRAS emphasises that taxpayers must be able to substantiate their basis for treating any gain, loss or deduction as capital in nature, and such basis should be consistent for both income tax and TP.

For example, where a Singapore entity claims a disposal loss as capital for income tax purposes, the same position should be coherently reflected in the transfer pricing analysis and documentation narrative, including how the transaction is delineated and priced.

Recourse to Taxpayers (Paragraph 8.12)

IRAS added paragraph 8.12 to explain options if a taxpayer disagrees with a TP adjustment. The taxpayer must follow IRAS’ Objection and Appeal Process and may also:

• Pursue domestic legal remedies under the Act; and/or,
• Request IRAS to address double taxation through the MAP.

Surcharges

Paragraph 9.4 clarifies that surcharges will be adjusted if IRAS’s TP adjustment is later amended, with any excess refunded. This clarification is relevant where taxpayers pay upfront surcharges during audit resolution, as it provides a clearer basis for refund outcomes if the adjustment is reduced through objection or MAP.

Additional Guidance on Attribution of Profits to a Permanent Establishment (PE)

The TPG8 is updated to outline that the attribution of profits to a PE is governed by the Business Profits Article of the relevant DTA. IRAS clarifies in paragraph 16.3 that if the conditions for no further attribution of profits to the permanent establishment (PE) are met, and provided that the PE has no other taxable presence in Singapore or income derived from Singapore, the PE is not required to file a tax return in Singapore. The conditions outlined are as follows:

• The PE receives an arm’s length remuneration aligned with its functional and risk profile.
• The remuneration is supported by TP documentation to demonstrate adherence to the arm’s length principle.
• The foreign related party does not perform any functions, use any assets or assume any risks in Singapore, other than those arising from the activities carried out by the PE for which the PE has received an arm’s length remuneration as mentioned in sub-paragraph (a).

Conclusion

In light of these updates to TPG8, taxpayers should review their existing TP practices and ensure alignment with TPG8. The revisions to TPG8 reinforce IRAS’ ongoing emphasis on intercompany financing arrangements. Although the changes introduce helpful measures that may ease the TP compliance burden for some related party loans, they also emphasise the importance of thoroughly analysing and properly documenting such financing transactions. Taxpayers should review whether they have adequately substantiated their intercompany financing arrangements.

Besides, taxpayers should also assess their strict pass-through costs application, declaration for simplified TP documentation, MAP strategies, and SSA application. Proactive assessment and timely compliance will help mitigate TP risks and position businesses to navigate the evolving TP landscape effectively.