1) Singapore is the preferred destination for the MNC's / MNE groups for setting up hub or HQs for APAC regions. The said guidelines provide for the determination of remuneration for such hubs/ HQs on arm's length basis;
2) Services provided by such hubs/HQs are critical to the operations carried on by the subsidiaries or fellow AE's. Accordingly, while determining the Arms length remuneration due consideration should be given to the HQ's/ Hub's contribution to the value creation. Such contribution should not be merely based on Functions, Assets and Risk (FAR) carried, but also on the economic significance of those functions performed;
3) The Guidelines discuss 4 types of centralized activities undertaken by HQs
(i) Principal in distribution, manufacturing or research and development arrangements;
(ii) Activities relating to core business processes;
(iii) Activities relating to administrative, technical, financial, commercial, management, coordination and control functions; and
(iv) Shareholder activities;
For each type of transaction, an indicative FAR analysis, as well as appropriate TP methodology, has been prescribed.
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