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Conditions for Claiming Input Tax

When purchasing from GST-registered suppliers or importing goods into Singapore, you may have incurred GST (input tax). You can claim the input tax incurred when you satisfy all of the conditions for making such a claim. You should only claim input tax in the accounting period corresponding to the date of the invoice or import permit.
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Conditions for claiming input tax

Conditions for claiming input tax

You can claim input tax incurred on your purchases only if all the following conditions are met:

  1. You are GST-registered;
  2. The goods or services are supplied to you or imported by you;
  3. The goods or services are used or will be used for the purpose of your business;
    Determining goods and services "for the purpose of business"

    Goods and services are considered to be used "for the purpose of business" when they can be attributed to business activities mainly concerned with making supplies for a consideration (e.g. payment in either money or in kind).

    Examples of non-business activities:

    •Activities with non-business objects in philanthropic, religious, political, patriotic or public domain

    •Free activities provided without commercial reasons

    •Activities that are purely private or personal If you have both business and non-business activities, you can only claim input tax attributable to business activities relating to taxable supplies.

    Please refer to GST on Non-Business Receipts (584KB) on determining your business and non-business activities, and how to apportion your input tax claims (where necessary).

  4. Local purchases are supported by valid tax invoices addressed to you, or simplified tax invoices, at the time of claiming of the input tax;
    Examples of invalid tax invoice

    Some common examples of tax invoices which are not valid are:

    Missing details on the tax invoice 
    • The supplier's name, address and GST registration number are not shown.
    • For purchases >S$1,000, the words "tax invoice", name of customer or GST amount is not shown.
    • For purchases ≤ S$1,000, the GST amount or a statement similar to "price payable includes GST" is not shown.
    • For purchases in foreign currency, the Singapore dollar equivalent amounts are not shown.
    Supplier is not GST-registered
    • Your supplier does not have a GST registration number or the GST registration number shown has expired/is not valid.
    • You can check on your supplier's GST registration status, period of registration and GST registration number using the GST Registered Business Search.

       

      Illustration of an invalid tax invoice

      Invalid tax invoice

      If the invoice issued by your supplier contains the above errors or has any other missing details, you should request that your supplier re-issues you a valid tax invoice before you proceed to make the input tax claim.  You do not need IRAS’ approval to make the request from your supplier for a valid tax invoice.

    • Imports are supported by import permits that show that you are the importer of the goods;
    • The input tax is directly attributable to taxable supplies (i.e. standard-rated supplies and zero-rated supplies), or out-of-scope supplies (e.g. third country sale of goods), that would be taxable supplies if made in Singapore;
    • The input tax claims are not disallowed under Regulations 26 and 27 of the GST (General) Regulations; and
      Disallowed input tax claims

      Regulations 26 and 27 of the GST (General) Regulations do not allow the following expenses to be claimed as input tax:

      • Benefits provided to the family members or relatives of your staff;
      • Costs and running expenses incurred on motor cars that are either:
        • registered under the business' or individual's name, or
        • hired for business or private use.
      • Club subscription fees (including transfer fees) charged by sports and recreation clubs;
      • Medical expenses incurred for your staff unless they are obligatory under the Work Injury Compensation Act or under any collective agreement within the meaning of the Industrial Relations Act;
      • Medical and accident insurance premiums incurred for your staff unless the insurance or payment of compensation is obligatory under the Work Injury Compensation Act or under any collective agreement within the meaning of the Industrial Relations Act; and
      • Any transaction involving betting, sweepstakes, lotteries, fruit machines or games of chance.
    • You have taken reasonable steps to ascertain and concluded that the goods or services were not part of a Missing Trader Fraud arrangement and the conclusion is one that a reasonable person would have made.
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    Determining input tax claims on common items

    Input tax treatment for common expenses

     

    ItemCan I claim input tax?

    Expenses incurred by employees on behalf of the company

    E.g. Expenses incurred for making business calls using employee's personal mobile phone

    • Subject to the  conditions for input tax claim, such claims are allowed if you can prove that the employee is acting as an agent of the taxable person (i.e. the business) in receiving the supply of goods or services.
    • For example, you are able to provide evidence of reimbursements made to the employee and have recognised the bills as business expenses in your accounts etc.
    • You need to segregate the business expenses from the private expenses. GST incurred for private expenses is not claimable.

    Entertainment expenses  

    • Subject to the conditions for input tax claim, these claims are allowed if you have the supporting tax invoice addressed to you or the simplified tax invoice if the purchase value (including GST) is not more than $1,000.
    • As an administrative concession, a receipt which contains all the information required in a simplified tax invoice can also be used to claim the input tax incurred for entertainment expenses exceeding $1,000 (including GST). You must also keep alternative documentary payment evidence and information on entertainment details (such as name of person entertained, purpose of entertainment, person incurring the expenses, etc.) to support your claim.
    • This concession is applicable only to expenses on food and drinks. In the event that an expense comprises of items other than food and drinks (e.g. rental of yacht), a proper tax invoice is still required to support the full claim.

    Staff medical expenses

    • Input tax claims are disallowed under Regulation 26 of the GST (General) Regulations.
    • However, subject to the conditions for input tax claim, these claims are allowed if the medical expenses (e.g. pre-employment and annual health screening expenses) are obligatory under the Work Injury Compensation Act (WICA) or under any collective agreement under the Industrial Relations Act (IRA).
    • To determine whether the medical expenses are obligatory under WICA, please visit the Ministry of Manpower (MOM) webpage on WICA or contact MOM at +65 6438 5122.  For clarification on collective agreements under IRA, please consult your trade union.

    Medical and accident insurance premiums for your staff

    • Input tax claims are disallowed under Regulation 26 of the GST (General) Regulations.
    • However, subject to the conditions for input tax claim, you are allowed to claim input tax if such insurance or the payment of compensation is obligatory under the Work Injury Compensation Act (WICA) or under any collective agreement under the Industrial Relations Act (IRA).

    • For example, you can claim input tax for work injury compensation insurance that is obligatory under WICA for both local and foreign employees performing:

      • Manual work, regardless of salary level; or
      • Non-manual work, earning $1,600 or less a month.

      If you require more information on WICA, please visit the Ministry of Manpower (MOM) webpage on WICA, contact MOM at +65 6438 5122 or contact your insurance agent.

    Cost and running expenses of motor vehicles
    E.g. Cost incurred for purchase of car, lorry and motorcycle

    E.g. Running expenses such as petrol and parking fees

    For motor cars that are registered under the business' or individual's name, or hired for business or private use:

    • Input tax claims are disallowed under Regulation 27 of the GST (General) Regulations.

    For other motor vehicles (e.g. lorry, van, motorcycle)

    • Subject to the conditions for input tax claims, input tax claims are allowed on motor vehicles that do not fall under the definition of a 'motor car' (i.e. constructed or adapted for the carriage of not more than seven passengers excluding the driver, and the weight of which unladen does not exceed 3,000 kilograms).

    Purchase of goods that you gave away for free to customers, suppliers, staff etc.

    E.g. Gifts, samples and lucky draw prizes

    • Input tax claims are allowed, subject to the conditions for input tax claim.
    • However, you may be required to account for output tax on the Open Market Value (OMV) of the goods if its cost exceeds $200. Refer to our website on  Gift and Sample for more information.

    Club subscription fees charged by sports and recreation clubs

    E.g. Joining fee, subscription fee, membership fee and transfer fee

    Input tax claims are disallowed under Regulation 26 of the GST (General) Regulations.

    Expenses for use of club facilities

    E.g. Green fees, buggy fees, rental of golf bag locker and dining at club restaurants

    Input tax claims are allowed, subject to the conditions for input tax claim.

    Family benefits for staff

    E.g. School fees for children of your expatriate staff

    Input tax claims are disallowed under Regulation 26 of the GST (General) Regulations.

    General insurance for the business
    • Input tax claims are allowed on general insurance expenses (e.g. fire insurance, burglary insurance, machinery risks insurance, trade cargo insurance), subject to the conditions for input tax claim.
    • As an administrative concession, input tax can also be claimed on public liability insurance. However, this does not apply if the premiums relating to the insurance coverage of medical costs for third parties can be separately identified. You can only claim GST incurred on the portion of premiums not relating to the coverage of medical costs.

    GST/VAT incurred for purchases made overseas

    E.g. GST charged to you under the Australian tax jurisdiction

    Input tax claims are disallowed because the GST/ VAT was paid to a party outside of Singapore tax jurisdiction.

    Properties purchased by non-legal entities

    Subject to the conditions for input tax claim, to claim input tax* on properties (both movable and immovable properties and intellectual properties) acquired through a bare trustee, the GST-registered non-legal entity must keep the following:

    • Tax invoice addressed to the bare trustee; and
    • Documents (e.g. trust deed) or records showing that the purchase is made by the bare trustee on behalf of the GST-registered non-legal entity. 

     

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    Common errors on input tax claims

    Every year, around 3,000 GST-registered businesses are selected for audit and the most common mistakes discovered are incorrect input tax claims. On average, more than $18,000 in GST and penalties are recovered yearly from each business due to such errors.

    Get to know the common input tax errors made by businesses and learn how you can avoid them through our new series of videos!

     

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    • I satisfy all the conditions for input tax claim. How do I declare my purchases and input tax in GST return (F5)?

      Total value of taxable purchases (Box 5):
      Declare the value of all your imports, standard-rated and zero-rated purchases and expenses (excluding the GST amount) made in the course or furtherance of your business.

      Input tax and refunds claimed (Box 7):
      Declare the input tax (i.e. GST amount) incurred for your imports, standard-rated purchases and expenses made in the course or furtherance of your business.

    • The import permit shows me as the importer. I also receive an invoice from my supplier. Should I declare the value of taxable purchases and input tax based on the import permit or the invoice in my GST return (F5)?

      You should declare the GST reflected in the import permit issued by Singapore Customs as your input tax in Box 7 of the GST return. Please ensure that there is no duplicate claim on the same purchase/ import.

      However, for the value of taxable purchase in Box 5, you may declare either:

      1. The value of imports reflected on the import permit; or
      2. The value of goods reflected on your invoice.

      Where the value reflected in the invoice issued by your supplier is different from the value reflected in the import permit, you should be able to reconcile the two values.

    • I have over-declared/under-declared my value of imports. What should I declare in my GST return (F5)?

      Please refer to our webpage on Importing of Goods (Mistakes on import declarations).

    • I purchase goods from my local suppliers and they bill me in foreign currencies. Do I claim GST based on the amount converted using my own exchange rates?

      Where purchases are negotiated in foreign currencies, your supplier has to indicate the GST payable on the tax invoice in Singapore dollars at a rate of exchange determined by him.

      You should claim GST incurred on such purchases based on the Singapore dollar GST stated in the tax invoice. This requirement is still applicable even though you may have recorded the Singapore dollar value of the purchases in your own books at a rate of exchange different from that used by the supplier.

    • Can I claim input tax if I am not GST-registered?

      No, you cannot claim any input tax if you are not GST-registered.

    • My business has stopped making taxable supplies and is in the process of winding down. I have incurred input tax on expenses (i.e. rental, utilities) which does not relate to any taxable supplies made earlier. Can I claim the input tax incurred as I am still GST registered?

      One of the conditions for input tax claim is that the input tax incurred is directly attributable to the making of taxable supplies. As you do not satisfy this condition, you cannot claim the GST incurred on such expenses.

       

      You should also cancel your GST registration since you have stopped making taxable supplies. Refer to our webpage on Cancelling GST Registration.