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 companies 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, 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 draft e-Tax Guide GST: Taxing imported services by way of reverse charge (842KB).

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 draft e-Tax Guide GST: Taxing imported services by way of an overseas vendor registration regime (377KB).

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.

    • Why is IRAS implementing reverse charge?

      Under the current GST rules, a supply of services (other than an exempt supply) by a supplier who belongs in Singapore is subject to GST while the same supply by a supplier who belongs outside Singapore is not. The non-taxation of imported services has created an uneven playing field between local and overseas businesses.

       

      Implementing reverse charge will level the GST treatment for services procured from overseas and those procured locally. This will achieve parity in GST treatment for all services consumed in Singapore.

    • 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. The salaries, wages and interest components of cost allocations, including their proportionate mark-up in accordance with transfer pricing policy, in inter-branch and intra-GST group transactions.
    • When does reverse charge take effect?

      Reverse charge will take effect from 1 Jan 2020.

    • 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.

    • Will IRAS give us sufficient time to prepare for the change?

      Yes, as the implementation date is 1 Jan 2020, you will have approximately 22 months to prepare for the implementation of reverse charge from the date of announcement.

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

      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 a draft e-Tax Guide (842KB) 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 email us.

  • Overseas Vendor Registration

    • How does overseas vendor registration work?

      The Overseas Vendor Registration Regime brings to tax business-to-consumer (B2C) supplies of digital services.

       

      Under the regime, suppliers belonging outside Singapore are required to register, charge and account for GST on supplies of digital services made to non-GST registered customers in Singapore. Under certain conditions, local and overseas operators of electronic marketplaces may also be regarded as the supplier of the digital services made by the overseas suppliers through these marketplaces. In such cases, the operators are required to register, charge and account for GST on these supplies, instead of the overseas suppliers.

    • Why is there a need to implement overseas vendor registration?

      Under the current GST rules, a supply of services (other than an exempt supply) by a supplier who belongs in Singapore is subject to GST while the same supply by a supplier who belongs outside Singapore is not. The non-taxation of imported services has created an uneven playing field between local and overseas businesses.

       

      As GST is a tax on local consumption, it ought to be levied on services consumed in Singapore, whether they are procured from local or overseas suppliers. As such, implementing an overseas vendor registration regime will level the playing field in GST treatment of B2C services consumed in Singapore between local and overseas suppliers.

       

      The vendor collection model is the most commonly adopted mechanism globally for taxing imported services in B2C transactions, in accordance with the recommendations in the OECD International VAT/GST Guidelines.

    • How does the change affect e-commerce businesses?

      With the implementation of the overseas vendor registration regime, overseas suppliers and electronic marketplace operators making substantial digital services to customers in Singapore may be required to register, charge and account for GST on these supplies. This will ensure a level playing field between our local e-commerce businesses which are GST-registered, and foreign-based ones which are not.

       

    • What is the scope of services that would be subject to GST under the overseas vendor registration?

      Under the regime, GST will apply on all digital services. These include supplies of downloadable digital content (e.g. mobile applications, e-books and movies), subscription-based media (e.g. news, magazines, streaming of TV shows and music), software programs (e.g. software, drivers and website filters), electronic data management services (e.g. website hosting and cloud storage), as well as support services performed via electronic means to arrange or facilitate transactions, which may not be digital in nature (e.g. service or booking fee charged to the suppliers or customers).

    • When does overseas vendor registration take effect?

      The regime will take effect from 1 Jan 2020.

    • I am an overseas online merchant providing digital services to customers in Singapore. Will I need to register for GST under overseas vendor registration?

      In general, overseas suppliers, with a global annual turnover of at least $1 million, making B2C supplies of digital services to non-GST registered customers in Singapore exceeding $100,000 are required to register, charge and account for GST on these supplies.

       

    • I am a local business providing platform services to local and overseas vendors. Am I impacted by overseas vendor registration?

      Under certain conditions, local and overseas operators of electronic marketplaces may also be regarded as the supplier of the digital services made by the overseas suppliers through these marketplaces.

       

      If you fulfil the conditions to be regarded as the supplier of digital services made to customers in Singapore by overseas suppliers through your marketplace, you are required to sum up the value of such supplies, in addition to the value of taxable supplies you are currently making 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 taxable supplies made directly by you, as well as on digital services made by overseas suppliers through your marketplace to customers in Singapore.

       

      [Note: As you belong in Singapore, the domestic registration threshold will apply to you. i.e. taxable turnover of $1 million]

       

    • How do I know whether the customer I am supplying digital services to, is in Singapore?

      For consistency with current GST rules, the existing belonging status guidelines will continue to apply. That is, for an individual, the customer is treated as belonging in Singapore if his usual place of residence is in Singapore.

       

      Given that digital services are transacted over the internet with limited information available in some instances, overseas suppliers may determine the belonging status of the customer by maintaining two pieces of non-conflicting evidence, based on appropriate proxies, such as billing address, IP address and credit card information.

    • How do I know whether the supply of digital services I am making is a B2C supply?

      You will be regarded as making a B2C supply of digital services if the customer is non-GST registered. By default, you will treat the services as being supplied to a non-GST registered customer, and charge and account for GST, unless the customer provides his GST registration number.

    • How do I report and account for GST under overseas vendor registration?

      Overseas suppliers and overseas electronic marketplace operators will register under a simplified registration regime, with reduced registration and reporting requirements. GST reporting will be done via electronic-filing.

       

    • If I incur GST on any expenses in Singapore, can I claim the GST under overseas vendor registration?

      Input tax claims are not a feature of the simplified regime.

       

    • What changes do I need to make to my accounting system?

      If you are liable for GST registration under the regime, you are required to charge and account for GST on B2C digital supplies made to customers in Singapore. As such, your accounting systems should be modified to account for GST on supplies of digital services, once you have determined that it is a B2C transaction, and that the customer belongs in Singapore.

       

    • Will IRAS give us sufficient time to prepare for the change?

      Yes, as the implementation date is 1 Jan 2020, you will have approximately 22 months to prepare for the implementation of overseas vendor registration regime from the date of announcement.

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

      IRAS has published a draft e-Tax Guide (377KB) to aid businesses in understanding the features of the overseas vendor registration regime 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 GST under the regime.

       

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

    • What does this change mean for consumers buying goods and services online?

      With the implementation of the overseas vendor registration regime, GST will apply to B2C supplies of digital services made by overseas suppliers to customers in Singapore.

    • Do I need to pay GST on all services I purchase from overseas suppliers?

      GST will be applicable if the overseas supplier is GST-registered in Singapore, and the services made by the supplier is within the scope of digital services under the regime.

       

    • If I purchase digital services through overseas platforms, do I need to pay GST?

      If the overseas platforms fulfil the conditions to be regarded as suppliers of digital services made on behalf of overseas suppliers listed on the platforms, they may be liable for GST registration under the regime. If registered, the overseas platforms will charge and account for GST on digital services made to you.

       

    • What about services purchased online from local suppliers?

      Normal GST rules will continue to apply. Supplies of services are generally subject to GST, unless they are exempt or qualify for zero-rating as international services.

       

    • Will all overseas suppliers of digital services be registered for GST under overseas vendor registration?

      Only overseas suppliers and electronic marketplace operators that make supplies of digital services exceeding the registration threshold are required to register for GST. Businesses that are not liable may also apply for voluntary GST registration, subject to conditions imposed by the Comptroller.

       

    • Am I required to provide GST registration number when I make online purchase of digital services?

      If you are making a purchase for your GST-registered business, you are required to furnish your GST registration number to the overseas vendor. If you fail to do so and are incorrectly charged with GST, you should contact the overseas vendor to obtain a refund, instead of claiming input tax on the purchase. If applicable, you should apply reverse charge on the purchase.

       

      However, if you are making the purchase in a private capacity, you should not provide incorrect or false information to the overseas vendor. It is a serious offence for a non-GST registered customer to misrepresent himself as a GST-registered person or as a customer belonging outside Singapore for the purpose of avoiding GST. Upon conviction, offenders may face heavy penalties.

       

    • How does IRAS check and ensure the registration of overseas vendors who are liable?

      Using various information sources, IRAS is able to identify overseas vendors that are liable for registration under the regime. With the implementation of the regime, IRAS will be proactively engaging overseas vendors to raise awareness and inform them of their potential registration liability.

       

      The current domestic penalty regime will apply to the overseas vendors. If these vendors do not comply with their obligations, IRAS is able to raise assessments, apply penalties and direct GST registration if these vendors are liable for registration in Singapore.

       

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