GST Treatment in Transfer Pricing (TP) Adjustment

It is common for a business to make TP adjustments to comply with the arm’s length principle for income tax purpose. However, such TP adjustments may have GST impact. The Inland Revenue Authority of Singapore (IRAS) recently updated the e-Tax guide that clarifies the GST treatment for TP adjustments and provided an administrative concession.

The Inland Revenue Authority of Singapore (IRAS) has published the summary of responses received from the public consultation exercise on the draft e-Tax Guides on “Taxing imported low-value goods by way of the overseas vendor registration regime” and “Taxing imported remote services by way of the overseas vendor registration regime”. The IRAS has issued a revised circular “GST: Transfer Pricing Adjustments (Second Edition)” on 1 June 2021. The revised circular explains the GST treatment for adjustments on the transfer prices of transactions between related parties covering both imported goods subject to GST and imported services subject to Reverse charge.

Amendments made in the revised circular include:

The extended administrative concession for taxable goods imported under an import GST suspension scheme and clarification that import GST suspension schemes exclude the Import GST Deferment Scheme (IGDS).
Clarification that no tax needs to be paid to Singapore Customs and no adjustments need to be made to GST returns if the person qualifies for the administrative concession. If the person is under IGDS and is not entitled to full input tax credit, additional tax need not be paid to Singapore Customs but adjustments to the GST return will still be required.
Clarification on when GST adjustments are required if no invoice is issued, and no payment is made/received for the transfer pricing adjustment.