In determining the arm’s length interest to be charged on related party loans, taxpayers may apply the indicative margin on each related party loan not exceeding S$15 million. If taxpayers choose to apply the indicative margin, they will apply the indicative margin on the appropriate base reference rate (e.g., SGD Singapore Inter Bank Offered Rate or SGD/USD swap rate) selected for the related party loan. The interest rate shall be equal to the indicative margin plus the appropriate base rate.
The Inland Revenue Authority of Singapore updates the indicative margin at the beginning of each calendar year. The indicative margin for 2021 (related party loan not exceeding S$15 million obtained or provided during the period from 1 January 2021 to 31 December 2021) is +275 bps (2.75%).
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.
For more information, please click here.
Source: Inland Revenue Authority of Singapore