To ensure that the tax system remains fair and resilient in the digital economy, Singapore is to introduce Goods and Services Tax (GST) on imported B2B and B2C services.
that the tax system remains fair and resilient in the digital economy,
Singapore is to introduce Goods
and Services Tax (GST) on imported services.
the advent of technology and digital economy, it has become increasingly common
for consumers in Singapore to obtain services from overseas suppliers. Most
often, these overseas service suppliers are able to deliver such services
without a presence in Singapore.
services such as consultancy and marketing purchased from overseas suppliers
are not subject to GST. Local consumers also do not pay GST when they download
apps and music from overseas. However, this will soon change.
GST is not applicable on imported services provided by an overseas supplier which
does not have an establishment in Singapore, according to the Budget 2018.
effect from 1 Jan 2020, the Singapore Government will introduce GST on
Business-to-Business (B2B) and Business-to-Consumers (B2C) imported services,
to ensure that local and imported services are accorded to the same treatment.
of these B2B services include IT services, consultancy services, marketing
services, accounting services, and management services, while B2C services
cover online subscription fees, video and music streaming services, software, apps,
and listing fees on electronic marketplaces.
for goods will not be affected by this new measure.
To ensure that the new GST will inflict minimal compliance
costs for businesses, while ensuring a level playing field between local and
overseas service providers, B2B imported services will be taxed via a reverse
charge mechanism while the B2C imported services will be taxed through an
Overseas Vendor Registration (OVR) model.
Under the reverse charge mechanism, the local GST-registered
business customer is required to account for GST to Inland Revenue Authority of
Singapore (IRAS) on the services that it imports, as if it were the supplier.
Reverse charge for
For GST on B2B services, the reverse charge mechanism
requires the local business customer to account for GST to IRAS on the services
it imports. The local business customer can in turn claim the GST accounted for
as its input tax, subject to the GST input tax recovery rules.
Only businesses that: (1) make exempt supplies, or (2) do
not make any taxable supplies need to apply reverse charge. This is because
their inputs are used to make non-taxable supplies of goods and services, such
as exempt supplies. Reverse charge will be applicable to such businesses, which
are primarily banks and financial companies, mixed and residential property
developers, and holding companies.
The majority of businesses make taxable supplies and thus
would not be affected by this reverse charge mechanism. Most businesses are
allowed to claim full refund of GST on the purchase of inputs used in their
business, including B2B services they import. They are allowed to do so because
their inputs are used to make taxable supplies of goods and services. For these
companies which the GST on imported services and claims are identical, reverse
charge will not apply, in order to avoid unnecessary compliance burden.
Registration (OVR) for B2C services
The taxation of B2C imported services will take effect
through an OVR mode.
Overseas suppliers and electronic marketplace operators will
need to be registered with IRAS. Once GST-registered, these overseas suppliers
and electronic marketplace operators will collect GST for IRAS on their B2C
supplies of digital services.
Specifically, overseas suppliers and electronic marketplace
operators like app stores which make significant supplies of digital services
to local consumers will be required to register with IRAS for GST. This applies
to overseas vendors whose annual global turnover exceeds S$1 million and whose
sale of digital services to consumers in Singapore exceeds S$100,000.
The S$1 million global turnover is consistent with the S$1
million GST registration threshold for suppliers in Singapore. The S$100,000
sale of digital services minimises the compliance burden on overseas vendors
which do not make significant sales to Singapore consumers.
Regarding GST for Digital Economy, IRAS will release draft
e-Tax guides by end-February 2018.
introduction of GST on imported services is a common tax implementation in many
jurisdictions, including Australia, the EU, Japan, Korea and New Zealand.
the other hand, there are on-going international discussions on how GST can
apply to imports of low-value goods.
the advent of technology, consumers in Singapore can buy overseas goods online
and these goods are then imported into Singapore.
the import relief for goods imported via air or post is set at S$400. This
concession recognises that the cost of compliance is likely to outweigh the
revenue collected. For goods above this threshold, GST is collected on the
The Singapore Government will continue to review
international development to decide whether to impose GST on low-value imported
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