VAT, GST and Sales Tax in Singapore

Summary

Name of the tax Goods and services tax (GST)
Date introduced 1-Apr-94
Trading bloc membership ASEAN
Administered by Inland Revenue Authority of Singapore (IRAS) (http://www.iras.gov.sg)
GST rates
Standard 7%
Other Zero-rated (0%) and exempt
GST number format
Local M2-1234567-8, MR-1234567-8 and 19-9012345-X
Nonresident F2-1234567-D
GST return periods Quarterly, Monthly (optional, subject to approval by GST Comptroller)
Thresholds
Registration SGD1 million
Recovery of GST by non-established businesses  No (unless the non-established business is registered for GST in Singapore)

Scope of the tax

GST applies to the following transactions:

  • Taxable supplies of goods and services in Singapore, made in the course of a business by a taxable person
  • Imports of goods into Singapore

Who is liable

A taxable person is a person who is registered or is required to be registered for GST.

Compulsory registration. The GST registration threshold is SGD1 million. For compulsory registration, the threshold applies in the following ways:

  • Retrospectively: registration is required if, at the end of any quarter, the value of taxable supplies in that quarter and the preceding three quarters exceeds SGD1 million. However, reg­istration is not required if the Comptroller of GST (the Comptroller) is satisfied that the value of taxable supplies in the following four quarters is not expected to exceed SGD1 mil­lion.
  • Prospectively: registration is required if at any time reasonable grounds exist for believing that the value of taxable supplies in the next 12 months is expected to exceed SGD1 million.

Under the first test above, a business must notify the Comptroller within 30 days after the end of the relevant quarter. Under the second test, a business must notify the Comptroller within 30 days after the beginning of the relevant period.

Voluntary registration. If the value of taxable supplies made by a business is below the registration limit, the business may register for GST voluntarily. A business that registers for GST volun­tarily must remain registered for at least two years unless other­wise allowed by the Comptroller.

Under GST law, “taxable supply” is defined as a supply of goods or services made in Singapore other than an exempt supply. Based on this definition, businesses that make wholly exempt supplies would not be eligible for GST registration. However, the GST Act allows a person that is not liable to be registered to apply for voluntary registration if it makes exempt supplies of financial services (as specified in Paragraph 1 of the Fourth Schedule to the GST Act) and the services would have qualified as interna­tional services if they were made by a taxable person.

In addition, a person who is not liable for GST registration may also apply for voluntary registration if the person makes or intends to make the following supplies:

  • Supplies outside Singapore that would be taxable supplies if made in Singapore
  • Supplies that are disregarded for GST purposes under the ware­housing regime or Approved Contract Manufacturer and Trader Scheme and that would otherwise be taxable supplies

However, a person in the above scenarios must have a business establishment in Singapore or have his or her usual place of resi­dence in Singapore.

Group registration. Businesses that are under “common control” may apply to register as a GST group. Each member must be indi­vidually registered for GST. After group members are registered as a GST group, they are treated as a single taxable person and sub­mit a single GST return. Supplies made between members within the same GST group are disregarded for GST purposes. Group members are jointly and severally liable for all GST liabilities.

A person that is not resident in Singapore or does not have an estab­lished place of business in Singapore may be part of the GST group if certain criteria are satisfied. If the GST group includes a person not resident in Singapore or not having an established place of business in Singapore, the representative member must satisfy additional criteria.

Divisional registration. If a taxable person carries on more than one business or operates several divisions, the person may apply to the Comptroller to register any of the businesses or divisions separately. Divisional registrations ease the GST administration for such businesses. On approval, each division is given a sepa­rate GST registration number and submits its own GST return. Supplies made between divisions within the divisional registra­tion are disregarded for GST purposes.

Exemption from registration. Where a taxable person makes sub­stantially zero-rated supplies and his collectible output tax is less than the amount of input tax claimable on his purchases in any 12-month period, the taxable person may request exemption from registration. Approval is subject to the Comptroller’s discretion.

However, if any material change occurs with respect to the nature of supplies or proportion of zero-rated supplies, the taxable per­son is required to notify the Comptroller within 30 days after the date of the change or, if no particular date is identifiable as the date of the change, within 30 days after the end of the quarter in which the change occurred.

Deregistration. A business that ceases operations must cancel its GST registration. A business that must deregister must notify the GST authorities within 30 days after ceasing to make taxable supplies.

A taxable person whose value of taxable supplies is not expected to exceed SGD1 million in the next 12 months may request deregistration from GST.

Non-established businesses. A “non-established business” is a business that has no business or fixed establishment in Singapore. A business that is not established in Singapore must register for GST if it makes taxable supplies exceeding the registration threshold of SGD1million.

Tax representatives. A non-established business must appoint a local tax representative to register for GST.

Registration procedures. To register for GST in Singapore, busi­nesses need to complete and submit the form GST F1, “Application for GST Registration,” together with the required supporting documents to the Comptroller of GST.

For partnership businesses applying for GST registration in Singapore, an additional form, GST F3, “Notification of Liability to be Registered: Details of All Partnerships and Partners,” together with form GST F1, must be completed and submitted to the Comptroller of GST.

For an overseas business with no establishment in Singapore and who makes taxable supplies in Singapore, the overseas business must appoint a local agent to be responsible for all its GST mat­ters in Singapore such as collecting GST on local taxable sup­plies made and timely filing of GST returns.

An application for GST registration is typically processed in about two weeks. In addition, for businesses applying for volun­tary GST registration, the sole proprietor, partner, director or trustee of the business is required to complete two e-learning courses, “Registering for GST” and “Overview of GST” and pass the quiz before applying for the voluntary GST registration (sub­ject to exceptions).

Businesses can apply for GST registration online via myTax Portal if the relevant personnel has been authorized to use the IRAS website’s e-services.

Late-registration penalties. Penalties are imposed for failure to register for GST, late payment of GST, late submission of GST returns, and the submission of incorrect returns.

GST schemes. A variety of schemes are available to assist busi­nesses to ease the administrative burden associated with GST compliance, as well as to improve cash flow. These schemes include the Major Exporter Scheme (MES), the Approved Contract Manufacturer and Trader Scheme (ACMT), the Approved Third Party Logistics (3PL) Company Scheme, the Import GST Deferment Scheme (IGDS), the Approved Marine Customer Scheme (AMCS) and the Specialised Warehouse Scheme (SWS). The AMCS and SWS are both effective from 1 October 2011.

Reverse charge. Not applicable.

Digital economy. Supplies of goods or services in Singapore via the internet or any other electronic media does not alter the tax­ability of the transaction.

GST rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to GST, including supplies that qualify for zero rating relief (subject to GST at 0%). The term “exempt sup­plies” refers to supplies of goods and services that are exempt from GST. Exempt supplies may give rise to a restriction on the input tax (see Section F).

The standard rate of GST in Singapore is 7%. The standard rate of GST applies to all supplies of goods or services, unless the supplies qualify for zero rating relief or exemption.

Exports of goods and international services are zero-rated. International services that qualify for zero rating are specifically listed in the GST Act. Exempt supplies include the sale or lease of residential property, the importation or supply of investment precious metals and the financial transactions listed in the Fourth Schedule to the GST Act.

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when GST becomes due is called the “time of supply” or “tax point.”

Before 1 January 2011, in general, the time of supply for goods was the earliest of the following events:

  • The date on which the goods were removed or, if not to be removed, were made available
  • The date of issuance of a tax invoice
  • The date of receipt of payment

Before 1 January 2011, in general, the time of supply for ser­vices was the earliest of the following events:

  • The date on which the service was performed
  • The date of issuance of a tax invoice
  • The date of receipt of payment

However, if the supplier issued a tax invoice within 14 days after delivering goods or performing a service, the time of supply became the date on which the invoice was issued, provided no pay­ment had been received before either the removal of the goods or the performance of the services (also known as the “14-day rule”).

Effective from 1 January 2011, the general time-of-supply rules are simplified. The new time of supply for both goods and ser­vices is generally the earliest of the following events:

  • The date of issuance of an invoice
  • The date of receipt of payment

As a result of the simplification of the general time-of-supply rules, the 14-day rule is also removed.

However, exceptions to the above time-of-supply rules exist.

Imported goods. The time of supply for imported goods is either the date of importation, or the date on which the goods leave a duty suspension regime or free-trade zone.

Recovery of GST by taxable persons

A taxable person may recover the GST incurred on its expenses as input tax if the input tax is incurred in the making of taxable supplies or certain prescribed supplies. Input tax refers to GST incurred on goods and services supplied to the taxable person or goods imported into Singapore by the taxable person that are used or to be used for the purpose of any business carried on or to be carried on by the taxable person. A taxable person gener­ally recovers input tax through its GST returns, by deducting it from output tax, which is GST charged on supplies made.

A valid tax invoice or import permit must be held to support a claim for input tax.

A taxable person is required to repay to the IRAS any input tax claimed for which payment has not been made to the supplier for more than 12 months from the due date of the payment.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business pur­poses (for example, goods acquired for private use by a taxable person and fringe benefits provided that these are not for the pur­pose of business). In addition, input tax may not be recovered for some items of business expenditure. The following lists provide some examples of items of expenditure for which input tax is not deductible and examples of items for which input tax is deduct­ible if the expenditure is related to a taxable business use.

 

Examples of items for which input tax is nondeductible

  • Purchases used for nonbusiness purposes
  • Purchase, lease, hire, maintenance and running costs of private motor cars
  • Recreational club subscriptions

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Advertising
  • Purchase of inventory
  • Purchase, lease, hire and maintenance of trucks and vans
  • Business entertainment
  • Attendance at conferences

Partial exemption. Input tax directly related to making exempt supplies is generally not recoverable. If a taxable person makes both exempt and taxable supplies, the person may not recover input tax in full. This situation is referred to as “partial exemp­tion.” Zero-rated supplies are treated as taxable supplies for these purposes.

Unless otherwise approved by the Comptroller, partial exemption recovery is calculated in the following two stages:

  • The first stage identifies the input tax that may be directly attrib­u table to taxable and to exempt supplies. Input tax directly attrib­utable to taxable supplies is deductible (unless specifically not deductible under the GST Act), while input tax directly related to making exempt supplies is generally not deductible (subject to exceptions).
  • The second stage identifies the amount of the remaining input tax (for example, input tax on general business overhead) that may be allocated to taxable supplies and recovered. The calcu­lation may be performed using the ratio of the value of taxable supplies over the value of total supplies (that is, taxable and exempt supplies), or it may be based on a special calculation agreed to with the Comptroller.

Notwithstanding the above provisions, if the value of a taxable per­son’s exempt supplies for an accounting period does not exceed both the average of SGD40,000 per month and does not exceed 5% of the total value of taxable and exempt supplies made in that accounting period, the input tax relating to the exempt supplies is treated as entirely attributable to taxable supplies. The GST Act provides relief for certain businesses to be treat ed as fully taxable if they make only certain types of exempt supplies.

Refunds. If the amount of input tax recoverable in a GST period exceeds the output tax in the same period, the excess is refund­able. Refunds are generally made within three months after the date on which the Comptroller receives the GST return. If a tax­able person submits monthly returns, the refund is generally made within one month from the date of receipt.

Interest at the prime lending rate is payable on the amount of any GST refund that is outstanding. Interest is calculated from the date on which the refund is due from the GST authorities.

Preregistration costs. Subject to certain conditions prescribed under the GST (General) Regulations, businesses may claim the GST incurred on business expenses incurred prior to its effective date of GST registration in its first GST return. Businesses are required to self-review their eligibility for the claims.

Recovery of GST by non-established businesses

Singapore does not refund GST incurred by non-established businesses that are not registered for GST in Singapore. Non-established businesses that are registered for GST may obtain a refund of GST only through the filing of GST returns.

Invoicing

Tax invoices and credit notes. A taxable person must issue a tax invoice for standard-rated supplies made to another taxable per­son within 30 days from the time of supply. A simplified tax invoice may be issued if the amount payable (including GST) does not exceed SGD1,000. The information required to be shown on a tax invoice and a simplified tax invoice is prescribed by GST law.

A tax invoice is necessary to support a claim for input tax credit.

A credit note may be used to reduce the GST charged and re claimed on a supply of goods or services if a valid adjustment has been made. The document must contain generally the same information as a tax invoice, as well as the amount of tax credit­ed, and it must refer to the date and number of the original tax invoice for the supply. If the date and number of the original tax invoice for the supply cannot be traced or identified, the taxable person must be able to satisfy the Comptroller by other means that the person has accounted for tax on the original supply.

Proof of exports. Exports of goods are zero-rated for GST pur­poses if they are supported by evidence confirming the departure of the goods from Singapore within 60 days from the time of supply (subject to exceptions). The evidence required includes the following documents:

  • Export permit
  • Bill of lading or airway bill
  • Original invoice

Export documents prescribed by the Comptroller for supporting the zero-rating GST treatment vary according to the export sce­nario.

Foreign-currency invoices. If a tax invoice is issued in a foreign currency, the total amount payable before GST, the GST charge­able, and the total amount payable including GST must be conver ted to the Singapore dollar equivalent. The foreign cur­rency must be converted to the Singapore dollar equivalent based on the selling rate of exchange prevailing at the time of supply. In practice, the Comptroller allows companies to apply the daily exchange rates (that is, the buying or selling rate, or the average of the two) of any banks operating in Singapore, or the exchange rates published by Singapore Customs. The Comptroller allows businesses to adopt their in-house exchange rates if the rates satisfy the following conditions:

  • They are reflective of the Singapore money market at the rele­vant date. For example, exchange rates obtained from local banks, Singapore Customs, locally circulated newspapers, reputable news agencies and foreign central banks without exchange controls are acceptable to the IRAS.
  • They are the daily buying rates, average of the buying and sell­ing rates, or a good approximation of the daily exchange rates, corresponding to the time of supply.
  • They are updated at least once every three months.
  • They are consistently used for internal business reporting, accounting and GST purposes.
  • They are used consistently for at least one year from the end of the accounting period in which the method was first used.

If the exchange rates used by businesses do not comply with these conditions, it is necessary for the companies involved to seek the Comptroller’s approval of the use of an acceptable exchange rate.

GST returns and payment

GST returns. Taxable persons generally file GST returns quar­terly. However, taxable persons that receive regular refunds of GST may seek approval to file their returns monthly, to ease cash flow. Effective from 1 January 2007, all newly registered busi­nesses must file GST returns electronically.

The GST return and payment in full are generally due one month following the end of the return period.

Penalties

A penalty of 5% of the tax due is assessed for late payment of GST. If the amount remains outstanding after 60 days, an addi­tional penalty is assessed, equal to 2% of the tax due for each month, up to a maximum of 50% of the unpaid tax.

A penalty of SGD200 per completed month is assessed for the late submission of a GST return, up to a maximum penalty of SGD10,000.