Indirect tax - Singapore

Goods and Services Tax (GST) is the main type of indirect taxation in Singapore. At revenues of S$10.3bn, it accounts for approximately 21% of total tax revenue receipts in FY2021.
It is a tax on consumption akin to a value added tax, which is applied on the supply of most goods and services in Singapore. It is also applied to goods that are imported into Singapore. Although GST is ultimately borne by the consumer, by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the supply chain rests with the GST-registered business making the taxable supply.
A business registered for the tax will charge GST (output tax) on its sales/services (supplies), and incur GST (input tax) on its purchases (including any GST paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of GST payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.
A transaction is within the scope of Singapore GST if the following conditions are met:
• it is a supply of goods or services. The term ‘supply’ is defined in the legislation to include anything that is done for consideration with legislative provisions that deems certain transactions to be a supply even though no consideration is received.
• the supply is made in Singapore.
• it is made by a taxable person. For these purposes, a taxable person is a person or entity who is registered for GST in Singapore, or has a liability to become registered.
• it is made in the course or furtherance of any business carried on by that person or entity.
There are two rates of GST that are applied to goods and services in Singapore; the standard rate and the zero rate. In addition, some goods and services are exempt from GST (e.g. the supply of investment precious metals, prescribed financial services).
Generally, businesses that make exempt supplies are unable to claim the input tax that they incur, so the GST paid to suppliers will be a ‘real’ cost with the exception of certain financial institutions where the input tax incurred may still be claimed based on a fixed rate prescribed by the tax authority.
All goods imported into Singapore are subject to GST at the standard rate (except investment precious metals which are exempt from import GST). The tax will have to be paid by the importer at the time of importation (unless the importer is under specific import GST relief schemes which allow the suspension/deferment of import GST). Where the importation is for business purposes and the importer is registered for GST, it is possible to reclaim the tax as an input tax credit in the GST return.
In addition to import GST, customs duty is levied on the importation of a limited range of goods being tobacco products, intoxicating liquors, motor vehicles and petroleum products and biodiesel blends. Import GST is charged on the cost, insurance and freight (CIF) value of the imported goods, including any custom duty.

A taxable person who either makes or intends to make taxable supplies of goods or services in the course or furtherance of a business must register for GST if the value of its taxable supplies made in Singapore exceeds the registration threshold of S$1 million in a calendar year, or is expected to exceed the threshold in the next 12 months. A taxable person can apply to register on a voluntary basis even if the registration threshold has not been exceeded. Approval of a voluntary registration application is subject to the discretion of the Comptroller of GST.

A taxable person includes an individual, partnership, company, club, association, society, management corporation or non- profitable organisation.

Two or more corporate bodies can be registered together as a GST group if:
i) each member in the group is already registered for GST individually
ii) each member in the proposed group must have at least one of the following attributes:
– a resident in Singapore or an established place of business in Singapore
– annual turnover of at least $1 million
– listed on a securities exchange established in or outside Singapore
– a subsidiary of a body corporate that fulfills (b) or (c) e financed by an entity (as part of its venture capital
investment business) who fulfills (b) or (c)
iii) the nominated representative member must be a Singapore resident or has an established place of business in Singapore. A company has an ‘established place of business’ in Singapore if it has a place at which it carries on business in Singapore, its physical presence is connected to a particular premise and this place of business is intended to have a degree of permanence
iv) for application which comprises an overseas person who does not fulfill (2)(a) above, both the foreign member and local representative member must have at least fulfilled (2) (b), (c), (d) or (e)
v) each member in the proposed group must satisfy one of the following control requirements. In general, control exists when there is a holding company-subsidiary relationship:
– one of the members controls each of the others
– one non-member (whether a body corporate or an individual) controls all the members
– two or more individuals (non-member) carrying on a business in partnership control all of the members.

The main advantage of GST group registration is that any supply of goods or services by a member of the group to another member of the group is disregarded for GST purposes. This reduces the risk of GST being accidentally omitted on supplies between separately registered related companies.

However, there are some disadvantages and any decision on whether to group register should be taken with care. For example, all GST group members are jointly and severally liable for the GST liability of the group during the period of their membership. Also, the lowest common input tax recovery rate applies to the GST group if one of the members is a partial exempt trader.

A penalty may be imposed by the tax authority if a business fails to register within 30 days of knowing its liability to register for GST.

Since 1 January 2020, non-resident businesses making supplies of digital services were required to register for GST if:
i) it has global revenue was greater than SGD1million; AND
ii) it supplied more than SDG100,000 of digital services to non-GST registered consumers based in Singapore

The thresholds also apply on a retrospective (calendar year basis) and prospective basis.

With effect from 1 January 2023, the scope of the OVR regime will be extended to include ‘remote services’ (digital and non-digital services) and ‘low-value goods’ (value of less than S$400) imported via air or post.

Remote services are defined as: as any services where, at the time of the performance of the service, there is no necessary connection between the physical location of the recipient and the place of physical performance.
Low-value goods are defined as goods which at the point of sale:
(i) are not dutiable goods, or are dutiable goods, but payment of the customs duty or excise duty chargeable on the goods is waived under section 11 of the Customs Act3 ;
(ii) are not exempt from GST;
(iii) are located outside Singapore and are to be delivered to Singapore via air or post; and
(iv) have a value not exceeding the import relief threshold of S$400.

The rules relating to whether an overseas business is established in Singapore are complex. However, broadly, the GST registration threshold applies to all businesses regardless of whether they are resident or non-resident. A non-resident business which makes taxable supplies of goods in Singapore is required to register for GST if the value of such supplies exceed the GST registration threshold of S$1 million.

See further comments on the OVR regime (applicable to non-established businesses) in section 2.

Yes. Singapore implemented the OVR regime with effect from 1 January 2022.

With effect from 1 January 2023, the scope of the OVR regime will be extended to include ‘remote services’ and ‘low-value goods’.

The Comptroller of GST usually requires an overseas entity (defined as one that is not a resident in Singapore and/or does not have an established place of business in Singapore) to appoint a local agent to act on his behalf for GST purposes if the overseas entity is liable to register for GST in Singapore, except for those registered under the OVR regime.

GST returns normally cover an accounting period of three months, ending on the last day of a calendar month and are lodged on a quarterly basis.

Businesses may also request for special accounting periods to coincide with its financial reporting. Businesses that are in a net refundable position (because of the nature of their activities) may apply to submit returns on a monthly basis to improve cash flow, subject to approval from the tax authority.

All GST returns must be submitted within one month following the end of the relevant accounting period, together with any tax due. Businesses with direct debit arrangement facility (GIRO) with the tax authority get a further fifteen days (in addition to the normal one month) to pay the tax due.

Penalties may be imposed by the tax authority if GST returns are not submitted on time, or the related tax is not paid by the due date.

When payment is not received by the tax authority by the due date, a 5% penalty may be imposed. A further 2% additional penalty may be imposed 60 days after the 5% penalty is imposed, if the tax is still not paid.

The 2% penalty is imposed for each month that the tax remains unpaid. The total additional penalty that can be imposed is up to 50% of the tax overdue.

No.

Yes. A range of penalties can be imposed where businesses do not comply with the GST rules.

Civil penalties and interest can be applied for errors and omissions made on tax returns, or where the tax is paid late.

Penalties can also be applied where the business has failed to maintain adequate records, provide information (including additional declarations), or make repeated mistakes.

Criminal proceedings may be brought in the case of more serious matters.

No.

A valid tax invoice must show:
• the words ‘Tax Invoice’ in a prominent place
• an invoice number which is unique and sequential
• the seller’s name and address
• the seller’s GST registration number
• the invoice date
• the customer’s name and address
• a description sufficient to identify the goods or services supplied to the customer
• for each description, the quantity of goods or the extent of services and the amount payable (excluding tax)
• any cash discount offered
• the total amount payable excluding tax, the rate of GST, the total tax chargeable and the total amount payable
• including tax shown separately (any such amount expressed in a currency other than Singapore currency, must also be expressed in Singapore currency)
• the breakdown of exempt, zero-rated or other supply, stating separately the gross amount payable in respect of each, if applicable.

Where a business makes supplies of goods or services and the amount invoiced including GST does not exceed SGD 1,000, a simplified tax invoice can be issued.

Tax invoices can be issued, received and stored in electronic format and there is no need to obtain prior approval from the tax authority (provided the conditions as prescribed by the tax authority are fulfilled). Electronic tax invoices must contain the same information as paper tax invoices. The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between the tax invoice and a supply of goods or services.