On 25 September 2026, Inland Revenue Authority of Singapore (IRAS) introduced a one-off concession allowing eligible taxpayers to apply the revised share-based compensation (SBC) treatment retrospectively to Year of Assessments (YAs) 2022 to 2025 and obtain a waiver of the 5% surcharge under Section 34E, subject to meeting prescribed filing deadlines.
Recap: YA 2026 SBC Treatment
Under the revised treatment from YA 2026, SBC remains part of the transfer pricing cost base. However, uncharged and notional SBC costs may be excluded when determining billable service income, while the corresponding mark-up remains included in the service income. Refer to our previous alert for additional details – Singapore Transfer Pricing: SBC Rules from YA 2026
What’s new: 25 September 2026 update
While the revised SBC treatment applies from YA 2026, IRAS has now provided a one-off opportunity allowing eligible taxpayers to apply the same treatment retrospectively for YAs 2022 to 2025. Taxpayers that make the required voluntary transfer pricing adjustments within the prescribed deadlines may obtain a waiver of the 5% surcharge under Section 34E.
Eligible taxpayers may elect to:
- Apply the revised treatment to YAs 2022 to 2025 (i.e., exclude uncharged and/ or notional SBC costs from service income for those years); and
- Submit revised tax computations showing full details of the mark-up on uncharged and/ or notional SBC costs, by the following deadlines:
- YA 2022: 15 November 2026
- YAs 2023 to 2025: 28 February 2027
Why this matters
- Taxpayers operating under cost-plus service arrangements, particularly regional headquarters, shared service centres and Research and Development (R&D) service providers, should review whether SBC relating to employees performing these services was included in their historical transfer pricing (TP) cost base. Where adjustments are required, the supporting calculations should be reconciled with historical tax computations and TP documentation, with particular attention to the upcoming YA 2022 deadline.
- Particular attention should be given to equity awards granted by overseas group companies that may not have been recharged to, or fully reflected in the accounts of, the Singapore From an employment tax perspective, taxpayers may wish to use this review as an opportunity to validate the completeness of historical employee share plan reporting, where equity awards were granted by overseas group companies and administered outside Singapore, and to address any gaps in employment tax compliance and supporting documentation.
- For fund management groups in particular, the exercise may also present an opportunity to review broader incentive arrangements to assess future considerations once more information is available on the proposed tax exemption for profit-related returns arising from the provision of fund management services to qualifying funds.
https://www.alvarezandmarsal.com/thought-leadership/singapore-transfer-pricing-alert-additional-guidance-on-transfer-pricing-adjustments-relating-to-sbc-costs
