Key Takeaways
1. The Goods and Services Tax (GST) is a 7% tax that is levied on goods imported into Singapore. It is known as Value Added Tax or VAT in other countries.
2. Singapore GST is known as a “multi-stage tax” because it is collected at each stage of the production and distribution process.
3. It is down to the individual company to establish whether they are required to register for GST. It is compulsory for companies to register where they have a yearly turnover of $1 million or more. Traders can also voluntarily register themselves if they are not required to do so by law and if they consider it to be beneficial to the business.
4. In Singapore, supplies are divided into four categories and each category determines differing tax rates. They include standard rate supplies, zero-rated supplies, exempt supplies, and out-of-scope supplies.
Overview of Singapore GST
According to the Singapore government, the Goods and Services Tax (GST) is “levied on the import of goods” into Singapore. The GST in Singapore is currently 7%.
Goods and services tax is levied in different ways:
● On goods and services that are supplied by GST registered businesses in Singapore
● On goods imported into Singapore
● On some imported services procured from overseas suppliers
The GST rate is added to the price that companies charge for their goods and services.
Applicable businesses must register for GST if their yearly turnover exceeds $1 million. In order to register, companies must be aware of the type of registration they require (compulsory or voluntary). It is therefore important for businesses to check whether they need to register or not. Even companies incorporated in Singapore will not automatically be registered, and will therefore need to register in order to comply with the law.
Typically, those who need to register under the “retrospective view” include those who have turned over more than $1 million at the end of the year. Under the “prospective view”, those who are due to turn over $1 million in the next 12 months are required to register.
It is ultimately the responsibility of GST registered traders to charge the tax on all taxable supplies. This is known as the ‘output tax’. Applicable companies must ensure they are registered before they are able to charge tax on relevant goods. The output tax must be paid to the Inland Revenue Authority of Singapore (IRAS) at the end of the accounting period. Equally, applicable companies can claim back on GST paid on business purchases (subject to satisfying certain conditions for claiming input tax).
What Is the Purpose of Singapore GST?
The GST was introduced into Singapore on 1st April 1994 with the purpose of enabling Singapore to place its reliance on indirect taxes instead of direct taxes. It is perceived as a way to lower personal income tax and corporate income tax rates, and provide a steady flow of income to the Singapore government regardless of the state of the economy. Additionally, as this is a tax reliant on consumption rather than income, it is considered fairer and encourages people to save and invest to promote a more stable economy.
Singapore GST and Types of Supplies
In Singapore, ‘supplies’ are divided into four categories and each category determines differing tax rates.
- Standard-rated supplies
- These supplies are taxed at 7%.
- Zero-rated supplies
- These supplies are taxed at 0%.
- Exempt supplies
- The GST does not apply to these supplies.
- Out-of-scope supplies
- The GST does not apply to these supplies.
What Is the Singapore GST Rate?
The tax rate for the Goods and Services Tax is currently 7%.
However, lawmakers plan to introduce an increase to the GST to 9% sometime between the year 2022 and 2025, depending on a variety of political factors.
What does Singapore GST Apply to?
GST is known as a “multi-stage tax” because it is collected at each stage of the production and distribution process. The “output tax” is that which a registered business must charge on its local supplies of goods and services and the “input tax” is the GST that the registered trader has paid on the purchase of goods and services for the business.
The GST is applicable to taxable supplies and this includes most local goods or services produced in Singapore unless they are exempt. The majority of local sales of goods and services are subject to what is called the “standard rate” of GST which is 7%. However, in Singapore, zero-rated supplies include exports of goods and international services. This means that a GST registered trader pays GST at 0% on applicable zero-rated supplies and can claim the input tax on paid purchases. In short, taxable supplies may be subject to the standard GST rate or may be zero-rated.
Exemptions to Singapore GST
Singapore GST does not need to be charged on exempt supplies. According to the Inland Revenue Authority of Singapore, supplies that are exempt include the following:
The provision of financial services
The supply of digital payment tokens (effective from 1 Jan 2020)- Digital payment tokens refer to any cryptographically-secured digital representation of value
The sale and lease of residential properties
The import and local supply of investment precious metals (IPM).
Additionally, some goods and services are zero-rated, including the following:
- Exported goods
- International services
Is My Company Required to Register for Singapore GST?
It is the responsibility of the individual company to establish whether it is required to register for GST in Singapore or not.
Compulsory Registration
Registration for GST in Singapore is mandatory when your taxable revenue is more than $1 million. Within one month of when your revenue crosses this threshold, you are required to complete an application to become GST registered to the IRAS. Failing to register with the tax authority within the applicable timeframe can result in significant penalties.:
GST Registration Exemption
You will not be required to register for GST if one or more of the following is applicable to your business:
- If your business does not have taxable revenue in excess of $1 million.
- Your business turnover comes from mainly zero-rated supplies.
- You are liable for GST under the retrospective view but not the prospective view, and you are certain that your business will not turnover $1 million in the next 12 months. The taxable turnover is therefore projected to be lower.
Voluntary Registration
If your business does not have taxable revenue in excess of $1 million, you do not have to register for GST. However, you might choose to voluntarily register for GST. The choice of whether to register for GST is an important one and is worthy of careful consideration.
There are benefits to being registered for GST such as it giving an indication that the business is a healthy one and is well-established in Singapore. Also, the GST can assist in reducing your tax liabilities and help maintain lower prices for your business products and services. The tax will be paid by the consumer and therefore no tax costs will be incurred for the business.
On the other hand, businesses will need to pay administrative costs in carrying out duties to collect and remit tax payments to the authorities. Additionally, non-GST registered customers will have to pay 7% more to purchase your goods and services due to the added tax. To be able to voluntarily register for GST, a business must be selling or plan to sell taxable supplies in Singapore.
The IRAS is in charge of approving voluntary applications. Once you receive approval for voluntary GST registration, you must stay registered for a minimum of two years. During this time, you must comply with the regulations related to GST, file your GST return in a timely manner and maintain tax records for a minimum of five years, even if your business has been dissolved and you deregistered for GST. The tax authority may impose additional requirements that you must meet as a condition of being voluntarily registered for GST.
Deregistration
If a business wants to cancel its registration — perhaps the business stops operating or GST is no longer applicable — it can do so by making an application to cancel the registration. This will be processed within 10 working days.
Procedure to Register for GST
The GST registration process depends on the type of registration and business, as such the first step is to establish whether you need to apply for voluntary or compulsory registration.
Applications and relevant supporting documents must be submitted online via mytax.iras.gov.sg.
The following details will need to be provided:
Your entity’s tax reference or GST registration number (e.g. 200312345A or M90312345A)
Your Singpass
Your client’s tax reference number (For tax agents only)
Supporting documents required in the “Documentation Checklist”.
In terms of processing times, compulsory registration applications will be processed within 2 working days and voluntary registration applications within 10 working days.
Remitting Payments for GST and GST Returns
As a GST registered business, you are responsible for collecting GST and declaring it to the IRAS. GST filing can be done through the online portal called “my tax portal”. Output and input tax must be declared and records of transactions must be provided. The difference between your output and input tax is what you must pay to the IRAS. If you paid more in input tax than output tax, IRAS will refund you the difference.
The GTS return must include the following information:
The total value of your local sales, exports and purchases from GST registered businesses
The GST you collected for the accounting period
The GST claimed for the accounting period.
These returns are filed electronically. Even if you do not owe any tax, you are still required to submit the return. Penalties can be imposed if your return is late, even if you are due a refund.
Contact Horizons
The GST system in Singapore is complex. Our local experts can provide you with additional information about our services and how we can help with doing business in Singapore.Contact us today to schedule a no-obligation GST consultation.
Frequently asked questions
According to the Singapore government, The Goods and Services Tax (GST) is “levied on the import of goods” into Singapore.
Those who need to register under the “retrospective view” include those who have turned over more than $1 million at the end of the year. Under the “prospective view,” those who are due to turn over $1 million in the next 12 months are required to register.
The Goods and Services Tax (GST) is a tax that is levied on goods imported into Singapore and is known as Value Added Tax or VAT in other countries.
