Draft legislation on the identification of related parties for partnerships, trusts and registered business trusts

        

With the proposed changes, the definition of “person” in the Singapore Income Tax Act will include partnerships, trustee of a trust and registered business trust. This means that where control over a partnership, trustee of a trust or registered business trust is established, the parties involved in the transaction with such partnerships, trusts, or registered business trusts will be considered to be related parties for transfer pricing purposes and hence the transfer pricing rules will have to be complied with. 

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The proposed amendments broaden the scope of transfer pricing. Currently, partnerships and trusts do not fall within the scope of transfer pricing rules as they are not considered a “person” under the Singapore Income Tax Act. However, the proposed amendments to expand the definition of “person” will mean that partnerships, trusts and registered business trusts will now have to monitor their related party transactions and comply with the required transfer pricing regulations. Failure to comply with the arm’s length principle and transfer pricing documentation requirements could result in non-compliance penalties.