New GST Treatment on Imported Services in Singapore
Singapore’s GST is known as Goods and Services Tax, is a tax levied on Goods and Services supplied and provided in Singapore, as well as on imported goods. Singapore’s GST is similar with VAT in other counties and is currently taxed at 7%.
GST is a tax on local consumption, i.e it’s levied on all services consumed in Singapore whether they are procured from local or overseas supplies. Based on current GST rules, services (other than an exempt supply) supplied by a supplier who belongs in Singapore is subject to GST while the same services supplied by a supplier who belongs outside Singapore is not.
To level the GST treatment for all services consumed in Singapore, as per the announcement in Budget 2018, the following regimes will be implemented from 1 Jan 2020 to tax imported services:
- Reverse charge regime for Business ?to Business (B2B) supplies of imported services, such as marketing service, IT services, accounting service etc;
- Overseas vendor registration regime for Business ?to Consumer (B2C) supplies of imported digital services, such as music and video streaming services, apps, online subscription fees.
Taxing B2B Imported Services by way of Reverse Charge (RC)
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- GST Registered Business
From 1 Jan 2020, under the RC mechanism, when an overseas supplier makes a B2B supply of services to a local GST-registered person, the GST-registered recipient is required to account for GST on the value of the imported services as if the recipient were the supplier(unless such services are specially excluded from the scope of reserve charge). The GST-registered recipient would be allowed to claim the corresponding GST as input tax, subject to the normal input tax recovery rules.
- Non-GST Registered Business
From 1 Jan 2020, if the total value of your imported services for a 12-month period exceeds SGD 1 million and you would not be entitled to full input tax credit even you were GST registered, you may become liable for GST registration under the new GST registration rules.
Once registered for GST, you will be required to account for GST on both your taxable supplies and your imported service which are subject to reverse charge.
- Scope of Imported Services
(1)
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Services that fall within the description of exempt supplies under theFourth Schedule to the GST Act;
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(2)
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Services that qualify for zero-rating under section 21(3) of the GST Act had the services been made to them by a taxable person belonging in Singapore;
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(3)
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Services provided by the government of a jurisdiction outside Singapore, if the services are of a nature that fall within the description of non-taxable government supplies under the Schedule to the GST (Non-Taxable Government Supplies) Order of the GST Act; and
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(4)
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Services directly attributable to taxable supplies (only applicable to businesses that are not granted a fixed input tax recovery rate or a special input tax recovery formula for all input tax claims).
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- Who Should be Concerned?
RC mechanism will impact certain groups of businesses, primarily financial institutions, mixed and residential property developers, investment holding companies deriving dividend and interest income from inter-company loans, as well as organizations that provide free or subsidised activities such as charities, Voluntary Welfare Organisations (VWOs), Non-Profit Organisations (NPOs), hospitals and educational institutions.
- Specially two groups of taxpayer applicable to RC are those:
(1)
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GST-registered persons procure services from overseas suppliers where they are either not eligible to claim full input tax or they belong to GST groups that are not entitled to a full input tax credit.
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(2)
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Non-GST registered persons who procure services from overseas suppliers exceeding S$1 million in a 12-month period and would not be entitled to full input tax credit even if GST-registered.
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Taxing B2C Digital Services by way of an Overseas Vendor Registration (OVR) Regime
| Companies outside Singapore will need to register OVR to tax B2C digital service if they meet the following criteria: I．have an annual global turnover exceeding SGD1 million; and II. make B2C supplies of digital services to customers in Singapore exceeding SGD100,000. Once registered for GST, you are required to charge and account for GST on B2C supplies of digital services made to customer in Singapore.
- Electronic Marketplace Operator
Under certain conditions, whether you are a local or an overseas operator of an electronic marketplace, you may be regarded as the supplier of the digital services made by the overseas suppliers through your marketplace.
In such cases, you are required to include the value of these services to determine your GST registration liability. If you are liable for GST registration or are already GST-registered, you are required to charge and account for GST on B2C supplies of digital services made through your marketplace to customers in Singapore on behalf of the overseas suppliers, in addition to digital services made by you directly to customers in Singapore.
To ease extra-territorial compliance burden, if you are an overseas operator, you will be registered under a simplified regime, with reduced registration and reporting requirements.
To determine if their customers belong in Singapore, the overseas suppliers and local or overseas electronic marketplace operators (collectively referred to as ‘Overseas Vendors? may use certain proxies, such as the customer’s IP address and credit card information.
- GST-Registered Businesses purchasing digital services from GST-Registered Overseas Vendors
Under the OVR regime, supplies of digital services to consumers (i.e. individuals and non-GST registered businesses) are subject to GST. A GST-registered overseas service provider will thus have to determine if a customer is GST-registered to charge GST correctly.
If you are a GST-registered business purchasing digital services from a GST-registered overseas service provider under the OVR regime, you need to provide your GST registration number to the provider so that GST will not be charged on business purchases of digital services. If you are a Reverse Charge business, you are required to account for GST on the imported digital services by way of reverse charge instead.
The following is a non-exhaustive list of included and excluded digital services:
(1)
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Excluded Digital Services
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Services
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Remarks/Examples
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Telecommunication Services
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Current zero-rating provisions accorded for cross-border telecommunication services; Unlikely for an overseas entity to provide local telecommunication services without a physical presence in Singapore as formal licensing is required.
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Professional Services Involving Human Intervention if Advice is provided by Electronic Means
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Legal services where advice from the lawyer is communicated via e-mail
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(2)
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Included Digital Services
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Services
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Remarks/Examples
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Supply of digital products
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Supply of Mobile Applications and E-Books
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Supply of software programs
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E.g. Downloading of software, Drivers, Website Filters and Firewalls
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Supply of images, text and information and making available of databases
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E.g. Subscription to online newspapers and journals, downloading of licensed images
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Supply of music, films and games
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E.g. Subscription to Apple music, Netflix
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Supply of distance teaching via pre-recorded medium or E-Learning
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E.g. Supply of online courses
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Supply of Electronic Data Management Services
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E.g. Website supply, web-hosting, automated and digital maintenance of programmes
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Services providing or supporting a Business or Personal Presence on an Electronic Network
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E.g. Subscription services for the maintenance of an online professional profile page
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Supply of Search-Engine and Automated Helpdesk Services
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E.g. Supply of customised search-engine services
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Listing Services for the right to put Goods or Services for Sale on an Online Market or Auction House
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E.g. Listing fees for merchants to list their items for sale
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