What Singapore can do to enhance carbon trading hub status

KPMG advises determining length prices for carbon credits.

Uncertainty on how to determine an arm’s length price for carbon credits remains an issue for this trading activity due to its uniqueness, advisory firm, KPMG, said.

To resolve this, the Inland Revenue Authority of Singapore (IRAS) may consider creating a guidance on  the transfer pricing considerations relevant to carbon credits.

Currently, IRAS said from 23 November 2022, the issuance, transfer, and sale of carbon credits including digitised form is to be treated as “neither a supply of goods nor a supply of services, i.e. an excluded transaction” for GST purposes. 

The transactions conducted prior to the said date will be subjected to GST, which clarifies GST treatment of carbon trading, reduces costs for businesses, and may help boost carbon credit marketplace in Singapore.