GST is a tax on local consumption, i.e. it is levied on all services consumed in Singapore whether they are procured from local or overseas suppliers. 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, the Minister for Finance announced in Budget 2018 that the following regimes will be implemented from 1 Jan 2020 to tax imported services:

  1. Reverse charge regime for Business-to-Business (“B2B”) supplies* of imported services; and
  2. Overseas vendor registration regime for Business-to-Consumer (“B2C”) supplies* of imported digital services.

* Business-to-business (“B2B”) supplies refer to supplies made to GST-registered persons, including companies, partnerships and sole-proprietors. On the other hand, Business-to-Consumer (“B2C”) supplies refer to supplies made to non-GST registered persons, which include individuals and businesses that are not registered for GST.

Taxing B2B imported services by way of reverse charge

If you are a GST-registered business

From 1 Jan 2020, if you are either:

  1. a GST-registered partially exempt business that is not entitled to full input tax credit; or
  2. a GST-registered charity or voluntary welfare organization that receives non-business receipts,

you will be required to account for GST on all services that you procure from overseas suppliers (“imported services”) as if you are the supplier, except for certain services which are specifically excluded from the scope of reverse charge.

You will be entitled to claim the corresponding GST as your input tax, subject to the normal input tax recovery rules.

If you are a non-GST registered business

From 1 Jan 2020, if the total value of your imported services for a 12-month period exceeds S$1 million and you would not be entitled to full input tax credit even if 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 services which are subject to reverse charge.

For more information, please refer to the e-Tax Guide GST: Taxing imported services by way of reverse charge (First Edition) (1066KB).

Taxing B2C digital services by way of an overseas vendor registration regime

If you belong outside Singapore, you are required to register for GST in Singapore if you:

  1. have an annual global turnover exceeding $1 million; and
  2. make B2C supplies of digital services to customers in Singapore exceeding $100,000.

Once registered for GST, you are required to charge and account for GST on B2C supplies of digital services made to customers in Singapore.

If you are an 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. 

For more information, please refer to the e-Tax Guide GST: Taxing imported services by way of an overseas vendor registration regime (First Edition) (792KB).

FAQs

  • Reverse Charge

    • How does reverse charge work?

      Reverse charge brings to tax Business-to-Business (B2B) supplies of imported services.

       

      The reverse charge mechanism requires the GST-registered recipient of the imported services to account for GST on the services as if he were the supplier. At the same time, the GST-registered recipient would be entitled to claim the GST as his input tax subject to the normal input tax recovery rules.

    • What is the scope of imported services subject to reverse charge?

      Reverse charge does not apply to all imported services. 

       

      The following services are excluded from the scope of reverse charge:

       

      1. Services that fall within the description of exempt supplies under the Fourth Schedule to the GST Act;
      2. Services that would qualify for zero-rating under section 21(3) of the GST Act had the services been made by a taxable person belonging in Singapore;

      3. Services that are directly attributable to taxable supplies (note: this does not apply to partially exempt persons who are granted a fixed input tax recovery rate or a special input tax recovery formula); and

      4. Services provided by the government of a jurisdiction outside Singapore, if the services fall within the description of non-taxable government supplies under the Schedule to the GST (Non-Taxable Government Supplies) Order of the GST Act.
    • I am GST-registered in Singapore and I import services in the course of my business. How am I affected by this change?

      You will be subject to reverse charge from 1 Jan 2020 if you are not entitled to full input tax credit (i.e. you are a partially exempt business or a charity/ voluntary welfare organization that receives non-business receipts).

       

      If you are subject to reverse charge, you will be required to account for GST on your imported services, unless the services do not fall within the scope of reverse charge. At the same time, you will be entitled to claim the corresponding GST as your input tax, subject to the normal input tax recovery rules.

    • I am not GST-registered but I import services in the course of my business. Will I be required to register for GST if the value of my imported services exceed $1 million in a year?

      If you are not GST-registered but you import services exceeding $1 million in a year, and you would not be entitled to full input tax credit if you were GST-registered, you will be required to register for GST.

       

      On the other hand, if you would be entitled to full input tax credit if you were GST-registered, the volume of your imported services will not trigger your GST registration liability.

    • Will I be entitled to claim input tax if I account for GST on imported services?

      Yes, you will be entitled to claim the GST accounted for on your imported services as your input tax subject to the normal input tax recovery rules.

    • What changes do I need to make to my accounting system to cater for reverse charge?

      Currently, you are not required to track your imported services for GST purposes.

       

      If you will be subject to reverse charge, you could modify your accounting system to keep track of your imported services from 1 Jan 2020. Modifying your accounting system to track your imported services will ease your compliance. Imported services which are within the scope of reverse charge should be assigned a different tax code from the imported services which are outside the scope of reverse charge. Where possible, the accounting of output tax and corresponding input tax could be automated too.

    • If we are unable to prepare for the change in time, is there a grace period or extension given?

      By announcing the change in Budget 2018, businesses are given approximately 22 months to prepare for the implementation of reverse charge. Once reverse charge is implemented on 1 Jan 2020, it will apply to all businesses who will be subject to reverse charge. IRAS will not grant an extension of time to any business or sector.

    • What resources / support will IRAS provide to help businesses cope with the change?

      IRAS has published an e-Tax Guide (1066KB) to aid businesses in understanding the features of the reverse charge mechanism and the related registration and compliance rules. The guide will also cover the transitional rules for transactions spanning the implementation date of 1 Jan 2020. Examples will be provided in the guide to illustrate the application of the reverse charge rules.

       

      If you have further queries about the regime, you may contact us.

  • Mechanics of Overseas Vendor Registration

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