What’s in this article
Many countries around the world have a Goods and Services Tax (GST). GST is a multi-stage tax on domestic consumption for which the final consumer receives the tax burden. A GST-registered person must charge and pay GST for goods and services used in their business.
The former is called “output tax,” and the latter is referred to as “input tax.” Additionally, GST applies to imported goods. Some countries refer to GST as value-added tax (VAT). One of the countries that has put GST into practice is Singapore.
Overview of GST in Singapore
In Singapore, GST was first implemented on April 1, 1994, under the Goods and Services Tax Act (GST Act). Unless stated, all references to Singapore tax law in the following paragraphs refer to the GST Act. This act was based on similar legislation from the UK and New Zealand: VAT legislation and GST legislation, respectively.
Singapore’s current GST rate is 7%, up from 3% at the time of its introduction. The Singaporean government also announced that GST will increase from 7% to 8% from Jan 1, 2023 and from 8% to 9% from Jan 1, 2024.
The Inland Revenue Authority of Singapore (IRAS) administers, assesses, and collects GST in Singapore. The IRAS also enforces payment of GST.
What is the difference between input tax and output tax, you may be wondering?
To put it simply, imagine you, an e-commerce retailer selling clothes on Shopee, imports shirts from overseas and subsequently resells it.
- Anyone whose output tax exceeds their input tax for a certain accounting period must pay this difference to the IRAS.
- Conversely, anyone whose input tax exceeds their output tax may claim this difference from the IRAS.
The Comptroller of Goods and Services Tax is responsible for the collection of GST in Singapore and the carrying out of the provisions of the GST Act. The Minister of Finance appoints the Comptroller.
Purpose of Singapore GST
The key purpose of implementing GST in Singapore is for the country to receive more indirect taxes over direct taxes. By reducing its reliance on direct taxes, it provides more avenues of stability in terms of income from tax-driven sources from goods and services. In doing so, they are able to keep income and corporate taxes low regardless of the economic outlook.
Four Categories of Goods & Services Tax (GST) in Singapore
GST divides all supplies in Singapore into four categories.
- Category 1: Standard-rated supplies – The authorities tax these supplies at the usual 8% GST rate (9% from 1 Jan 2024 onwards). Standard-rated supplies include most local sales of goods and provisions of services, like at restaurants or clothing.
- Category 2: Zero-rated supplies – These supplies are not subject to any additional GST costs and include the export of goods and services deemed international. This includes exporting machinery and chemical products manufactured in Singapore.
- Category 3: Exempt supplies – Exempt supplies also do not have GST applied to their costs. Examples of exempt supplies are sales and leases of unfurnished residential properties, financial services, and the importation and local supply of precious metals for investment purposes.
- Category 4: Out-of-scope supplies – These transactions fall outside the scope of GST. Various supplies are considered out of the scope of Singapore GST. These include the following, among others:
- sales in which goods are delivered from a location abroad to another location abroad;
- private transactions;
- brokerage charges on foreign fares; and
- supplies made before April 1, 1994.
Like Exempt Supplies, Out-of-scope supplies are also not subject to GST.
According to the GST Regulations, if a taxable person publicly displays or advertises the price of any supply of goods or services, the price shown must include GST. Any taxable person intending to display GST-exclusive prices must seek approval from IRAS. Retailers must state GST-inclusive prices on their receipts and simplified tax invoices, printing them with the words “amount payable includes GST”.
However, they do not need to show the amount of GST payable separately.
A taxable supply made by a taxable person, also known as a GST-registered person, as part of a business transaction, incurs GST on any supply of goods or services made in Singapore.
GST on Imported Goods Into Singapore
According to the GST Act, the importation of goods into Singapore is subject to GST. The government imposes and charges GST in the same way as customs duty. Singapore Customs is responsible for the collection of GST on imported goods. Section 14 of the GST Act states that if a person outside Singapore provides a service not specified in the Fourth Schedule to a recipient in Singapore for business reasons, the recipient must account for GST as if they supplied the service in Singapore.
Starting from January 1, 2020, GST will also apply to imported services. This new GST charge will tax imported services in two ways:
- The reverse charge will apply to business-to-business imported services, and
- Overseas vendor registration regime, which taxes business-to-consumer digital services.
Benefits of GST in Singapore
The benefits of GST for the Singapore Government include:
- It generates a stable and predictable tax income in both good and weak economic environment.
- It is an efficient tax due to the comparatively lower cost of administration and collection.
- It allows the Government to lower corporate and personal income taxes, which in turn encourages more foreign direct investment. This leads to overall economic growth.
The benefits of GST for businesses & individuals include:
- Most large, established businesses register for GST, signaling to customers that they have a certain size and level of establishment.
- GST is a fairer tax system. It taxes the self-employed and wage earners only when they spend their money.
- GST taxes apply only on consumption. The government does not tax savings and investments. This will encourage people to save and invest in productive activities.
- Reducing the cost of doing business contributes to lower prices. Businesses do not suffer a tax cost due to the multi-stage credit mechanism since the real taxpayer is the end-user.
Disadvantages of GST in Singapore
When it comes to the disadvantages of GST in Singapore, they include:
- The administrative burden that comes with discharging the duties and responsibilities of GST registration.
- One must either study the intricacies of GST or hire an accountant to undertake this work, which in some cases can incur a reasonably high cost.
- Registering for GST effectively increases your selling price by 9%. Customers who do not have GST registration cannot recover the GST you charge. Recovering GST can lower your costs, but your customers might not appreciate it.
- GST can burden lower income groups, especially during times of high inflation, when they have to pay the 8% tax (increased to 9% on 1 Jan 2024) on the increasing price of daily essentials.
Eligibility for GST Registration in Singapore
Certain persons in Singapore must register to become taxable persons or GST-registered persons. Registration for GST is mandatory for those with over S$1 million in taxable turnover at the end of the calendar quarter prior to January 1, 2019 and the past three quarters, as well as those with over S$1 million in taxable turnover at the end of any calendar year on or after January 1, 2019.
Those not required to register for GST include individuals whose taxable turnover mainly or entirely comprises zero-rated supply, enabling them to apply for exemption from registration.
Liable for GST Registration
Persons who are liable for GST registration under the retrospective view but not the prospective view also do not have to register if they meet the following conditions:
- The expected taxable turnover is not expected to exceed S$1 million for the next 12 months.
- Specific circumstances are projected to cause a decline in taxable turnover, and
- The person has supporting documentation to back up the projection. However, this person must also monitor taxable turnover at the end of the next calendar year. On the other hand, those who are not liable for GST registration may nevertheless opt to do so.
Before registration, the following factors must be taken into consideration:
The responsibilities of a GST-registered business,
- Suppliers’ profile,
- Customers’ profile,
- Type of sales to be made, and
- Pricing decisions to be made after GST registration.
GST registration process
The GST registration process includes four steps (or five if it is voluntary registration).
- Determine the type of GST registration
- If is voluntary registration, the next step is to complete two e-learning courses titled “Registering for GST” and “Overview of GST”, then pass a quiz
- Applicant must submit an application for GST registration online via myTax Portal
- IRAS will take around 10 working days to process each application and may request for additional information and supporting documents
- Once approved, the applicant will receive the letter of notification for GST registration outlining the GST registration number and effective date of the registration
Individuals obligated to register for GST must do so within 30 days from the date they become liable. Those required to register retrospectively must do so by the third month of the calendar year, while those needing to register prospectively must do so within 31 days from the forecasted date.
Anyone who registers late will be punished with the following:
- Their registration date will be backdated to the date when they became liable. They must account for and pay GST on their past sales from the effective registration date, even if they did not collect any GST from their customers.
- May be fined up to S$10,000 and a penalty equal to 10% of the GST due.
GST exceptions
However, the IRAS is willing to make exceptions to the above in certain situations. Applicants who voluntarily disclose that their registration is late will generally have their late notification fine and penalties waived. The IRAS also allows those who are unable to pay the GST due on the backdated period to do so in instalments.
Sometimes, GST de-registration may be necessary. This usually occurs when a GST-registered person ceases to make taxable supplies. The individual must then notify the Comptroller in writing within 30 days from the cessation date. If the Comptroller determines that the GST-registered individual is no longer liable for registration, they will terminate the registration.
If the Comptroller finds that the person still makes taxable supplies or deems it necessary to protect revenue, they may refuse to cancel a voluntary registration.
Claiming & Charging of Singapore GST
When a consumer purchases anything from GST-registered suppliers or imports goods into Singapore, the consumer may incur input tax. The consumer can claim input tax incurred if they satisfy all the conditions for making such a claim. However, the consumer must make the claim during the accounting period that corresponds to the date shown in the tax invoice or accounting permit.
Conditions to claim input tax
The consumer must fulfill seven conditions to claim input tax, as follows:
- The consumer is GST-registered;
- The goods or services must have been supplied to the consumer or the goods must have been imported by the consumer;
- The goods and services are used or will be used for the consumer’s business purposes;
- Local purchases must be supported by valid tax invoices addressed to the consumer or simplified tax invoices at the time of claiming the input tax;
- Imports must be accompanied by import permits proving the consumer to be the importer of the goods;
- The input tax directly relates to standard-rated or zero-rated supplies, or out-of-scope supplies, which would be standard-rated or zero-rated if made in Singapore.
- The input tax claims are not prohibited under Regulations 26 and 27 of the GST (General) Regulations.
Either a valid tax invoice (for purchases of less than S$1,000) or a simplified tax invoice (for purchases of more than S$1,000) containing all required details is necessary for one to claim input tax on any purchases or expenses. If IRAS finds the tax invoice submitted to be invalid, they will disallow the tax claims and may impose penalties.
Invalidate a tax invoice
There are two common examples of factors that invalidate a tax invoice. One example occurs when the invoice has missing details.
There are four ways this could be the case:
- If the supplier’s name, address, and GST registration number are not shown;
- If the purchase is worth more than S$1,000 and any of the words “tax invoice”, the customer’s name, or the GST amount are not shown;
- If the purchase is worth less than S$1,000 and either the GST amount or a statement similar to “price payable includes GST” is not shown;
- Or if the purchase was made in foreign currency and the equivalent amount in Singapore dollars is not shown.
Another example of an invalid tax invoice is when the supplier is not GST-registered. This is evident when the supplier lacks a GST registration number or possesses an expired or invalid GST number.
To qualify as a tourist
Tourists may also claim a refund of GST paid on purchases made in Singapore if certain criteria are fulfilled. To qualify as a tourist, a person must not be:
- A Singapore citizen or permanent resident;
- Have spent 365 days or less in Singapore over the two-year period before the date of purchase;
- The person must not have worked in Singapore over the six-month period before the date of purchase, must not be a member of the aircraft crew departing Singapore, and must be at least 16 years old at the time of purchase.
- And if the person is a student pass holder, must have purchased the goods within the four-month period before the expiry of the student pass.
If the person qualifies as a tourist, the following criteria must be fulfilled to receive the tourist refund:
- The customer must purchase the goods and receive an electronic Tourist Refund Scheme (eTRS) ticket from the retailer.
- The customer must spend at least S$100, including GST.
- the GST refund must be applied for by using the Token or eTRS Tickets at an eTRS self-help kiosk;
- the tourist must depart with the goods within two months from the date of purchase;
- the tourist must depart with the goods within 12 hours after obtaining approval of the GST refund;
- and the tourist must claim the refund from the approved central refund counter operator within two months from the date of approval of the application.
Tourist with student pass
If the tourist holds a student pass, the tourist must also have purchased the goods within the four-month period before the expiry of the student pass and intend to depart with the goods and remain outside Singapore for a minimum period of 12 months.
Only GST-registered businesses are allowed to charge and claim GST from their effective date of GST registration. Businesses without GST registration cannot levy GST charges. If a business has wrongfully charged or collected GST from its customers, it must remit the GST collected to the IRAS. Similarly, only GST-registered businesses may claim GST.
However, specific industries have granted concessions to non-GST registered businesses, subject to conditions, to claim any GST incurred. Qualifying funds that are managed by a prescribed fund manager in Singapore are allowed to claim any GST incurred on prescribed expenses at an annual fixed recovery rate via remission. Real Estate Investment Trusts (S-REITs) and qualifying Registered Business Trusts (S-RBTs) are allowed to claim GST on any expenses they incur for their business and Special Purpose Vehicles (SPVs).
Assessment and Refunding of GST in Singapore
The Comptroller can assess GST if a taxable person fails to file returns or provide necessary documents. This encompasses situations where returns contain errors, omissions, or where incorrect refunds have been issued.
When filing a GST return, the taxpayer must make payment for the due GST to the Comptroller by the deadline specified in the GST Regulations. Should the input tax exceed the output tax, the Comptroller must refund the difference to the taxable person.
GST truly permeates every aspect of daily life in Singapore. While GST may seem simple, its intricacies make it detailed and complex. Adhering to GST laws supports Singapore’s economy by ensuring the system operates smoothly.
FAQs
There are various types of tax incentives available to companies and these are provided in the Singapore Income Tax Act (ITA) and Economic Expansion Incentives Act (EEIA). Some of the tax incentives available are listed in the table below.
Governing legislation | Types of incentives | Where to apply |
---|---|---|
ITA/S13F | Approved International Shipping Enterprise | MPA www.mpa.gov.sg |
ITA/S13H | Approved Venture Company | EDB www.edb.gov.sg |
ITA/S14B | Further deduction of expenses relating to Approved Trade Fairs, Trade Exhibitions, Trade Missions or to maintain overseas Trade Office | IE Singapore www.enterprisesg.gov.sg |
ITA/S14E | Further deduction of expenses on Research and Development Project | EDB www.edb.gov.sg |
ITA/S14O | Tax deduction of special reserves for catastrophic risks of approved general insurers | MAS www.mas.gov.sg |
ITA/S19C | Writing down allowance for cost sharing agreement | EDB www.edb.gov.sg |
ITA/S43(9) | Concessionary rate of tax for income of life insurance companies apportioned to policyholders | – |
ITA/S43C | Concessionary rate of tax for approved offshore general insurance companies | MAS www.mas.gov.sg |
ITA/S43C | Concessionary rate of tax for approved offshore life insurance companies | MAS www.mas.gov.sg |
ITA/S43C | Concessionary rate of tax for approved offshore composite insurance companies | MAS www.mas.gov.sg |
ITA/S43C | Exemption of tax for approved marine hull and liability insurer (onshore and offshore business) | MAS www.mas.gov.sg |
ITA/S43C | Exemption of tax for approved offshore captive insurance companies | MAS www.mas.gov.sg |
ITA/S43C | Exemption of tax for approved insurer underwriting offshore qualifying specialised insurance risk | MAS www.mas.gov.sg |
ITA/S43E | Concessionary rate of tax for Approved Operational Headquarters (OHQs) | EDB www.edb.gov.sg |
ITA/S43G | Concessionary rate of tax for Approved Finance and Treasury Centre | EDB www.edb.gov.sg |
ITA/S43Q | Concessionary rate of tax for Financial Sector Incentive Companies | MAS www.mas.gov.sg |
ITA/S43P | Approved Global Trading Company | IE Singapore www.iesingapore.gov.sg |
EEIA/ Part II | Pioneer Industries | EDB www.edb.gov.sg |
EEIA/ Part III | Pioneer Service Companies | EDB www.edb.gov.sg |
EEIA/Part IIIB | Approved Shipping Logistics Enterprise | MPA www.mpa.gov.sg |
EEIA/ Part IIIB | Development & Expansion Incentive | EDB www.edb.gov.sg |
EEIA/Part X | Investment Allowances | EDB www.edb.gov.sg |
EEIA/Part XIIIB | Overseas Enterprise Incentive | IE Singapore www.iesingapore.gov.sg |
EEIA/Part VIA | Export Service Company | EDB www.edb.gov.sg |
A complete set of unaudited accounts consist of:
– Directors’ Report
– Statement by Directors
– Profit & Loss Statement
– Balance Sheet
– Detailed Profit & Loss Statement
– Notes to the Accounts
The Form C is a declaration form used by a company to declare its income. Please ensure that all the necessary sections in the Form C are correctly completed and that it gives a full and true account of the company’s income.
In completing the Form C, please note:
All lines must be completed. Any field that is not applicable should be filled in as “0″ Do not indicate remarks such as “See attached” or “As per tax computation” on the Form C The declaration section on page one of the Form C must be signed by the person making the return. Guide to completing Form C for Year of Assessment 2009 onwards
A company, regardless of whether it is a local or a foreign company, will be taxed on its:
- income accruing in or derived from Singapore; or
- income received in Singapore from outside Singapore
Income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending in the year preceding the YA.