Regulated Financial Institutions

The Monetary Authority of Singapore regulates the activities of the financial institutions. Examples of financial institutions include banks, insurance companies and stock brokers.

Exempt Financial Services

When the financial services provided fall within the 4th Schedule of the GST Act, the services are exempt supplies. No GST needs to be charged for exempt supplies.

Examples of these financial services that are exempt supplies include:

  • Provision of loans;
  • Issue / sales of shares or bonds;
  • Provision of life policy by an insurance company;
  • Charges by banks for the operation of bank accounts;
  • Exchange of currency; and
  • Provision of derivative that does not lead to any delivery of goods or services.

For the full list of exempt financial services, please refer to the list of financial services (170KB).

Arranging of Exempt Financial Services

Services such as the arranging or broking of insurance, underwriting or advising of financial activities do not fall within the scope of exemption. You need to charge GST for such services.

Where the services qualify as international services, you may zero-rate such supply of services (i.e. charge GST at 0%).

Claiming GST Incurred

When you make exempt supplies and taxable supplies, GST incurred on your business purchases cannot be claimed in full unless you satisfy the De Minimis Rule.

Rules for Claiming GST Incurred

You must follow the rules below when claiming GST incurred on your business purchases:

  1. You are allowed to claim input tax that is directly attributable to the making of taxable supplies, subject to conditions for claiming input tax.
  2. You cannot claim input tax that is directly attributable to the making of exempt supplies.
  3. For input tax that cannot be identified as directly attributable to either taxable or exempt supplies (i.e. residual input tax), the amount that can be claimed is computed using the following formula:
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For more information, please refer to GST: Partial Exemption and Input Tax Recovery (550KB).

Banking Industry

For ease of compliance, banks are approved to adopt a fixed input tax recovery ratio for the purposes of claiming input tax (excluding disallowed expenses) on an industry basis. This ratio is reviewed on a yearly basis.

Banks are also granted some administrative concessions to ease GST compliance. Banks that require more details can enquire with us or the Association of Banks of Singapore. If you are a tax agent representing a banking client and require more information on concessions specific to banks, please write in to us with your name, the tax firm and details of the bank that you are representing and your contact details.

Claiming GST on Expenses for Qualifying Funds

Funds may incur GST when the fund procures services (e.g. fund management service) from GST-registered businesses.

Updated!

To simplify the rules for claiming GST incurred, all qualifying funds that are managed by a prescribed fund manager in Singapore are allowed to claim GST incurred on expenses at an annual fixed recovery rate from 22 Jan 2009 to 31 Mar 2019 (both dates inclusive).

 

To claim the GST incurred, qualifying funds will have to submit a quarterly Statement of Claims to IRAS based on its financial year end. Each Statement of Claims is due one month after the end of the respective quarters. As an administrative concession, funds can submit the Statement of Claims on a half-yearly or yearly basis as long as the claims are made within 5 years from the end of the respective quarters.

Example:

Period of claims: 1 Apr 2012 to 30 Jun 2012

Qualifying funds can submit the Statement of Claims latest by 30 Jun 2017.

Reporting Exempt Supplies

Exempt supplies have to be reported in Box 3 (Total value of exempt supplies) of your GST return.

You may engage in foreign currency transactions and derivative transactions such as swaps, futures and forwards which do not lead to the physical delivery of goods or services.

You should report the net realised gains or losses arising from such transactions as the value of exempt supplies.

Exempt supplies arising from the issuance or sale of shares, bonds, options, warrants, interest rate collars, floors and caps are reported based on gross proceeds received .

Find out more on value of exempt supplies to be reported in How Do I Prepare My GST Return (1.31MB).

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