If you run a business in Singapore that deals with related companies overseas—like a parent company, subsidiary, or sister company—there’s one tax rule you really need to be aware of: transfer pricing.

It might sound like something only big multinational corporations worry about, but transfer pricing rules apply to any Singapore-based company that transacts with related parties across borders. And getting it wrong can lead to unexpected tax bills and even penalties.

Transfer pricing isn’t just a technical tax concept—it’s something every company with cross-border operations should understand. These rules are there to ensure fairness in how profits are reported and taxed across countries, and the Inland Revenue Authority of Singapore (IRAS) expects businesses of all sizes to follow them.

This article breaks it down simply, so you know what matters, what to look out for, and how to stay compliant without getting buried in legislation.

What Is Transfer Pricing?

Transfer pricing is all about how much your Singapore company charges—or is charged—when it buys or sells something to a related company overseas.

For Example: If your Singapore company pays your parent company $200,000 a year for “management services,” how do you know that’s a fair price? 

That’s where transfer pricing rules step in. The IRAS wants to ensure you’re charging or paying what’s called an “arm’s length” price — basically, the price you’d agree on if both parties were unrelated and negotiating normally.

If IRAS thinks you’re undercharging or overpaying (which could reduce your taxable profits in Singapore), they can make adjustments — and add a penalty on top.

Whilst traditionally associated with large multi-national companies, the principles of transfer pricing applies whenever a company deals with a related party.  “Related” means there’s some form of control or influence—same shareholders, same directors, same group of companies. 

Transfer Pricing Compliance

Here is what you need to focus on to ensure that you are compliant with your transfer pricing obligations.

1. Price Things Like You’re Independent

You should price intercompany transactions the same way you’d price them with an unrelated third party. That means you need to be able to explain why the pricing is fair and commercially reasonable.

2. Keep Proper Documentation

If your total revenue is over S$10 million, and your related party transactions cross certain thresholds (e.g. S$15 million in goods, or S$1 million in services), you’ll need to prepare what’s called transfer pricing documentation which you must keep for at least 5 years.

The documentation must include:

1. Group and entity-level business descriptions
2. Functional analysis of entities involved (functions, assets, risks)
3. Details of related party transactions
4. Transfer pricing method(s) used and rationale
5. Benchmarking analysis with comparables
6. Assumptions and economic conditions

Remember, even if you’re under these thresholds, IRAS still expects you to apply the arm’s length principle—and having basic documentation helps protect you.

3. Be Consistent And Defensible

IRAS may review your transactions during a tax audit, especially if your Singapore company shows low profits or losses. You’ll want to be ready to explain how you arrived at the prices you charged or paid.

If your pricing isn’t defendable, IRAS may adjust your taxable income and impose a 5% surcharge on the adjustment.

Common Examples Founders Should Watch For

Here are some real-life examples where transfer pricing rules come into play:

• Payments to HQ for branding, legal, or strategy services. Can you show the value of those services and that the fee is reasonable?
• Import of products from your overseas factory. Are you charging yourself a fair wholesale price, or are you inflating/deflating margins?
• Use of intellectual property (like software or a brand name) from a related company. Is the royalty rate reasonable based on similar deals in the market?
• Loans made to your overseas subsidiary. Are you charging interest? Is the rate similar to what a bank would charge?

How To Stay Compliant (Without Stressing Out)

Here’s a practical checklist:

1. Identify your related party transactions – Make a list of any dealings with overseas related companies.
2. Review your pricing – Ask: Would I agree to this price if I were dealing with a third party?
3. Prepare documentation early – Don’t wait until IRAS asks. A simple summary that explains the “who, what, and why” goes a long way.
4. Update it annually – Your business evolves, and your documentation should too.
5. Get expert help if needed – For complex transactions (like IP, licensing, or large service fees), a tax advisor or transfer pricing specialist can help you benchmark prices and draft supporting documents.

Advance Pricing Arrangements 

If your company does a lot of high-value intercompany transactions, Singapore offers something called an Advance Pricing Arrangement (APA). This is an agreement between you and IRAS that locks in your transfer pricing method for several years. It gives you certainty and reduces audit risk—but it takes time and preparation to set up, so it’s better for larger businesses or high-stakes deals.

In Summary

If you are a Singapore based company dealing with overseas-based related parties, then the issue of transfer pricing is one you will need to manage as soon as possible. Here are the 5 key principles to remember: 

1. Transfer pricing rules apply to any Singapore company transacting with related overseas entities.

2. All intercompany prices must reflect “arm’s length” terms.

3. Documentation is required—especially if your revenue exceeds S$10 million.

4. Non-compliance can lead to tax adjustments and a 5% surcharge.

5. Regularly review intercompany dealings and prepare justifications.

If you’re planning to relocate permanently from Australia to the United States, understanding how your assets will be taxed is crucial. Whether you own shares, rental properties, or other investments, both countries have complex tax rules that may apply. Proper planning helps ensure you’re not taxed twice on the same gain.

What Happens To Your Asset Values When You Move To The U.S.?

Important: Contrary to what many assume, the United States does not automatically reset or “step-up” the tax value (basis) of your assets when you become a U.S. tax resident. Instead, your original purchase price typically remains the basis for calculating your future U.S. taxes. This means you may face U.S. taxes on gains that occurred even before moving to America.

Example (Shares):

Say you bought shares in a major Australian bank years ago for AUD $30,000. By the time you relocate to the U.S., they are worth AUD $150,000. Later, as a U.S. tax resident, you sell them for AUD $180,000. Without special planning, the U.S. taxes you on a gain of AUD $150,000 (AUD $180,000 minus your original AUD $30,000 purchase price)—even though most of that appreciation occurred while you lived in Australia.

Australia’s Exit Tax: What Is It?

When you cease Australian tax residency, Australia imposes a tax on your worldwide capital assets, treating most as if you’ve sold them at their current market value (Income Tax Assessment Act 1997, section 104-160). This “exit tax” effectively taxes your accumulated gain up to that point.

Example (Shares Continued):

At departure, your shares valued at AUD $150,000 (original cost AUD $30,000) would trigger Australian Capital Gains Tax (CGT) on the AUD $120,000 gain immediately—even though you haven’t actually sold them.

Risk Of Double Taxation

If no special steps are taken, you face paying tax twice:

• First – Australia taxes your AUD $120,000 gain at the time you leave.
• Later – The U.S. taxes the entire AUD $150,000 gain when you sell the shares, including the AUD $120,000 already taxed by Australia.

Clearly, this is not ideal. Fortunately, the U.S.-Australia Tax Treaty provides two valuable solutions.

Solution #1: The Treaty Basis Step-Up (Paying Australian Exit Tax)

Under Article 13(5) of the U.S.-Australia tax treaty, you can elect to treat your assets as sold and immediately repurchased at their market value at the time you cease Australian residency, effectively “stepping up” your basis for U.S. tax purposes.

Example (Shares):

Using the treaty election, your U.S. tax basis for the shares is reset to AUD $150,000—the market value at your departure from Australia. Later, when you sell these shares in the U.S. for AUD $180,000, you pay U.S. tax only on the AUD $30,000 gain accrued after moving. This prevents double taxation, as the pre-move AUD $120,000 gain was already taxed by Australia.

Solution #2: Deferring Australia’s Exit Tax (Exclusive U.S. Taxation)

Australia offers an alternative: you may defer the immediate payment of the exit tax (ITAA 1997, section 104-165). Instead of paying tax upfront, you defer taxation until the actual sale of your assets. Under normal circumstances, this deferred asset would remain taxable by Australia.

However, Article 13(6) of the U.S.-Australia treaty states that if you move to the U.S. and defer Australian exit tax, Australia relinquishes its right to tax that gain, granting exclusive taxing rights to the U.S.

Example (Shares With Deferral):

You defer the Australian exit tax on your shares. Several years later, as a U.S. resident, you sell these shares for AUD $180,000. Australia no longer has the right to tax this gain. Only the U.S. will tax you, applying tax to the full AUD $150,000 gain (original AUD $30,000 cost basis to AUD $180,000 sale price).

This approach gives you cash-flow flexibility at departure (no immediate tax payable), and you may benefit if U.S. tax rates are lower.

How These Rules Impact Different Types Of Assets – Practical Examples

Example 1: Rental Property

Suppose you bought a Sydney apartment as an investment property 10 years ago for AUD $500,000. It’s now worth AUD $1,200,000. You relocate to the U.S. permanently:

Example 2: Portfolio Of International Shares

Suppose you invested AUD $100,000 into global shares now worth AUD $400,000 when you leave Australia for the U.S.:

• Australian Treatment At Exit
  Australia taxes the AUD $300,000 gain immediately (shares aren’t Australian property, so they face immediate exit tax).
• U.S. Without Treaty Step-Up
  Later selling at AUD $450,000, U.S. taxes AUD $350,000 (AUD $450,000 sale price less original AUD $100,000 cost), again double-taxing most of the gain.
• With Treaty Step-Up
  By electing the treaty basis step-up, your U.S. tax basis is reset to AUD $400,000. Selling later at AUD $450,000, the U.S. only taxes AUD $50,000, preventing double taxation on pre-move gains.

Example 3: Shares In Your Australian Business

You founded a small Australian business, investing AUD $200,000 initially. By relocation time, it’s worth AUD $1,000,000.

• Australian Treatment
  Australia imposes exit tax on your AUD $800,000 gain at departure, unless you defer.
• U.S. Without Treaty Step-Up
  Selling later at AUD $1,200,000, the U.S. taxes AUD $1,000,000 (full gain from initial AUD $200,000), causing double taxation on AUD $800,000 already taxed by Australia.
• With Treaty Step-Up
  Treaty election resets your U.S. basis to AUD $1,000,000. Selling later for AUD $1,200,000, you only pay U.S. tax on AUD $200,000, protecting you from double taxation.

How To Make A Treaty Election?

To claim this valuable treaty-based step-up, you’ll typically file IRS Form 8833 (Treaty-Based Return Position Disclosure) with your first U.S. tax return as a resident, clearly electing the treaty basis step-up under Article 13(5).

Key Points To Remember

• The U.S. generally does not reset your tax basis on relocation.
• Australia’s exit tax rules may cause double taxation if ignored.
• The U.S.-Australia tax treaty offers a treaty-based step-up or exclusive taxing right to the U.S., protecting you from double tax.
• Proper planning is essential. Evaluate your choices carefully, ideally with professional advice, to choose the best strategy for your situation.

Understanding these tax implications early helps you confidently and efficiently transition your financial life from Australia to the U.S.