Singapore: Cost-plus mark-up basis available - KPMG Global
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Singapore: Cost-plus mark-up basis available for service companies

Singapore: Cost-plus mark-up basis available

The Inland Revenue Authority of Singapore (IRAS) has clarified its administrative practice is to allow services companies providing “routine support services” to adopt the cost-plus mark-up method.


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The subject routine support services are those listed in an annex of the IRAS e-Tax Guide: Transfer Pricing Guidelines (4th Edition) [PDF 1.02 MB]


As an administrative practice, the IRAS is prepared to allow the adoption of the cost-plus mark-up basis for service companies on the premise that the business transactions of such companies are simple—meaning, they do not undertake risks or own significant assets (including intellectual property rights) and their expenditures are typically operating expenses. Under the cost-plus mark-up basis, chargeable income is computed based on 5% mark-up of total expenditures without further adjustment. In March 2017, the IRAS informed that a review revealed that the cost-plus mark-up basis was not consistently applied by taxpayers; was applied on a broader scope of services; and was not limited to companies providing routine support services only.


The IRAS made the following clarifications:

  • The cost-plus mark-up basis is strictly for services companies providing certain routine services only to related parties.
  • When the cost-plus mark-up basis is adopted, the chargeable income is computed based on a 5% mark-up of total expenditures (without any further adjustments).


Companies that fall outside the scope of the cost-plus mark-up basis but that have adopted the cost-plus mark-up basis will have to move to the normal trading company (NTC) basis of assessment, effective for year of assessment 2019. Also, services companies using the cost-plus mark-up basis and that are seeking to make tax adjustments and tax claims also would need to move to the NTC basis of assessment because the cost-plus mark-up basis would no longer be relevant for them. 


Further guidance from the IRAS is expected by September 2017.


Read a May 2017 report [PDF 358 KB] prepared by the KPMG member firm in Singapore

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