The Inland Revenue Authority of Singapore (IRAS) has published updated indicative margins for related party loans. IRAS has introduced an indicative margin which taxpayers can apply on each related party loan not exceeding S$15 million as tabulated in this table:
| Related party loan not exceeding S$15 million obtained or provided during the period | Indicative margin |
| 1 January 2017 to 31 December 2017 | + 250 bps (2.50%) |
| 1 January 2018 to 31 December 2018 | + 175 bps (1.75%) |
| 1 January 2019 to 31 December 2019 | + 175 bps (1.75%) |
| 1 January 2020 to 31 December 2020 | + 200 bps (2.00%) |
| 1 January 2021 to 31 December 2021 | + 275 bps (2.75%) |
The indicative margin is not mandatory. It gives taxpayers an alternative to performing detailed transfer pricing analysis in order to comply with the arm’s length principle for their related party loans.
The indicative margin is in addition to an appropriate base interest rate, such as SIBOR for floating rate loans or the SGD/USD swap rate for fixed rate loans, and is updated at the beginning of each calendar year.
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.
