Over the past month, Singapore’s new GST regulations have been a hot topic among many international investors. Due to the multiple business advantages, many foreign investors have chosen to register company in Singapore for both onshore and offshore businesses. GST, an indirect tax, is imposed on the majority of goods and services intended for domestic consumption. Although consumers bear the cost, businesses selling these goods and services are responsible for remitting the collected GST to the government. Essentially, GST serves as a revenue source for the government, contributing to public funds through the taxation of various transactions in the marketplace. Highly urbanized with a robust economy, Singapore ranks in the world’s top five as a financial center. Its free-market economy operates in an open and corruption-free environment with stable prices and high per-capita GDP.
Revised GST compliance measures effective 2021.
On 18 February 2020, the Singapore finance minister Mr. Heng Swee Keat confirmed in his budget 2020 speech that the GST will remain at 7% until 2020, but the same will increase to 9% between 2022 and 2025. The increase is mainly to raise the tax revenue to meet Singapore’s predicted future spending requirements.
Transportation expenses
IRAS concludes that it is the personal responsibility of employees to ensure that they arrive at work on time, and they may choose the most appropriate mode of transport to work. Thus, GST registered business that incur GST on transport expenses such as chartered buses, taxis, drivers, chauffeurs, or other pre-booked forms of transport for carrying the employees between one location to the workplace during ordinary working hours are not allowed to claim GST.
However, GST incurred on all other types of employee transport expenses is claimable (e.g., where arranged transport services transport employees between designated pick-up/drop-off points and the workplace). Prior to the amendments, IRAS only allowed GST to be claimed where the working location was at least a certain specified distance from the nearest public transport.
When an expense is incurred in relation to a motor car as defined under regulation 25 of the GST regulations. Such an input tax is not claimable.
Temporary accommodation provided to foreign employees
Input tax relating to temporary accommodation provided to overseas employees of GST registered business who visit Singapore for business purpose or relocated to Singapore/another country are now claimable. Prior to amendments, the entire input tax for temporary accommodation provided for more than 31 days for a single visit was disallowed.
GST Assisted Compliance Assurance Program
GST registered businesses now have the option to participate in the GST Assisted Compliance Assurance Program (ACAP) in place of GST audit. An entity that does not wish to participate in the ACAP must provide the IRAS with a contact person with whom the IRAS may liaise over the subsequent GST audits. A business can benefit by participating in the ACAP as there is a one-time waiver of all penalties for disclosure of past errors; where errors are uncovered by the IRAS during the audit. In addition, the business will also have increased flexibility to schedule internal resources to manage IRAS requirements on submission of documents. An ACAP participant will have 15 months from the date of their acceptance to submit the documents.
It is compulsory that a GST Accredited Tax Advisor who is a member of the Singapore Institute of Accredited Tax Professionals (SIATP) to perform the ACAP review.
GST registration requirements
The obligation for GST registration is contingent on the company’s taxable turnover. It is mandatory by law if the turnover exceeds S$1 million in the preceding 12 months or is projected to surpass this threshold in the next 12 months. Conversely, if the annual turnover is below S$1 million, while not obligatory, voluntary registration is an option.
Singaporean companies surpassing a specific revenue threshold, known as taxable turnover, are obligated to undergo GST registration. Businesses falling below this threshold are not compelled to register for GST but have the option to do so voluntarily. Regardless of registration status, all GST-registered companies must levy and file GST returns. After registration, a company is obliged to maintain its GST registration for a minimum period of two years.
Mandatory registration threshold
Companies in Singapore must register for and collect GST under the following circumstances:
- If their taxable turnover in the preceding 12 months surpasses S$1 million OR
- If the company anticipates exceeding S$1 million in taxable turnover in the upcoming 12 months.
Companies should assess their taxable turnover at the conclusion of each quarter to ascertain GST registration necessity.
If a company has exceeded S$1 million in taxable turnover in the past 12 months, it must register for GST within 30 days from the end of the last quarter when this threshold was reached.
Companies projecting to surpass S$1 million in taxable turnover in the next 12 months must register for GST within 30 days of making this determination.
Voluntary registration
Companies in Singapore with an annual taxable turnover below S$1 million are not compelled to undergo GST registration. However, they retain the option to voluntarily register for GST if they choose to do so.
For those opting for voluntary GST registration, the company’s director(s) must complete two e-Learning courses: “Registering for GST” and “Overview of GST,” unless any of the following conditions apply:
- The company director possesses experience in managing other existing GST-registered businesses.
- The individual responsible for preparing the company’s GST returns is an Accredited Tax Adviser (ATA) or Accredited Tax Practitioner (ATP).
- The person handling GST returns has completed the specified e-Learning courses within the last two years.
Exemption from registration
Certain companies obligated for mandatory GST registration have the option to apply for an exemption with IRAS. To qualify, these companies must meet the following criteria:
- At least 90% of the company’s total revenue must come from supplies that are not subject to GST, specifically categorized as “Zero-rated” supplies.
- The net balance of GST collected for supplies versus GST paid for purchases must be negative, indicating that the company would have been eligible for a GST refund from IRAS as a registered GST business.
Additional Reporting Requirements introduced in Singapore new GST
With the implementation of Reverse Charge and Overseas Vendor Registration, the IRAS has announced on its website that GST returns for periods ending on or after 1 January 2020 will include two new boxes (box 14 and box 15). The first quarterly GST returns including the two new boxes will be for the following periods:
- 1 November 2019 to 31 January 2020;
- 1 December 2019 to 29 February 2020; and
- 1 January 2020 to 31 March 2020.
Box 14 applies only to reverse charge businesses (e.g., financial institutions, residential property developers, etc.), while box 15 applies only to electronic marketplace operators supplying digital services. All other GRB may complete their GST returns as usual.
Key points regarding Singapore new GST
- Known as Value Added Tax (VAT) in some jurisdictions, GST is a consumption tax applicable to goods and services within a country. In Singapore, the current GST rate is 9%.
- End consumers bear the GST cost, with businesses responsible for both collecting and remitting the tax to the Inland Revenue Authority of Singapore (IRAS). Businesses act as GST collection agents for IRAS.
- GST is only imposed by registered businesses, and mandatory registration is required for those with an annual taxable turnover exceeding S$1 million, although businesses below this threshold can voluntarily register.
- Imported goods also incur GST, with Singapore Customs levying the tax on imports.
- Certain business types, such as financial services, residential property sales and leases, and the import and local supply of investment-oriented precious metals, are exempt from GST.
- Exports of goods and specific services to overseas clients are not subject to GST.
- GST-registered companies must submit GST returns to the IRAS monthly or quarterly.
- The GST collected from customers is termed “output tax,” while the GST paid on business purchases or to suppliers is referred to as “input tax.”
- GST-registered businesses can claim credit for input tax, offsetting it against output tax. As a result, businesses only pay GST on the value added to their products or services, calculated as the difference between output and input tax.
How does Singapore new GST measures affect your business?
First and foremost, it is important for you to know whether your Singapore business is legally required to register for GST. There are multiple advantages and disadvantages to register GST for your Singapore business. In the event your business is already GST-registered, you should also look at the other accounting and tax obligations in Singapore. Consequently, you will then be able to make adjustments to your business strategies in order to optimize your company taxes.
Contact us to find out more about accounting and tax obligations in Singapore. Tetra Consultants Tax Team will revert within the next 24 hours.
