Zero-rating of consultancy and professional services
Services of engineers, accountants, lawyers and other similar consultancy/professional services can be zero-rated under Section 21(3)(k) of the GST Act if the services are supplied:
- Under a contract with a person wholly in his business capacity and who in that capacity belongs outside Singapore; and
- Directly benefit a person wholly in his business capacity and who in that capacity belongs outside Singapore. With effect from 1 Jan 2020, the services will also qualify for zero-rating if the services directly benefit a GST-registered person belonging in Singapore.
The services must not be services supplied directly in connection with land or goods situated in Singapore. In addition, any part of the supply of services relating to accommodation and entertainment will not qualify for zero-rating.
Your overseas customer can be in Singapore to receive your services. To determine the belonging status of your customer, please refer to Belonging status of your customer.
Example: You provide consultancy services on the feasibility of conducting a business to an overseas customer.
Services of estate agents, auctioneers, architects, surveyors and engineers and others involved in matters relating to land can be zero-rated under Section 21(3)(e) of the GST Act if the services are made directly in connection with land or buildings located outside Singapore. The services must not include:
- The supply of a right to promulgate an advertisement by means of any medium of communication; and
- The promulgation of an advertisement by means of any medium of communication.
- An architect in Singapore provides design services in respect of a building located in China.
- An estate agent in Singapore sells a house in London.
Recovering expenses from clients
In the course of supplying consultancy or professional services, you may pay for expenses on behalf of your client. When you subsequently recover the expenses from your client, whether you need to charge GST on the recovery will depend on whether the expenses is incurred by you as a principal or as an agent. For the purpose of GST, the recovery of an expense that you incur as a principal is termed "reimbursement" and that as an agent is termed "disbursement". A disbursement is not subject to GST while a reimbursement may be subject to GST if it is consideration for a taxable supply of goods or services.
For more information on the GST treatment for the recovery of expenses, please refer to Recovering expenses (re-billing).
I have paid for and subsequently recovered expenses incurred on behalf of my client. My client is legally responsible for paying the expenses to the supplier. Am I or is my client entitled to claim the GST incurred on the expenses?
Your client is entitled to claim the GST incurred on the expenses, subject to the conditions for input tax claim.
The recovery of expenses from my client is a reimbursement. Am I or is my client entitled to claim the GST incurred on the expenses?
You are entitled to claim the GST incurred on the expenses, subject to the conditions for input tax claim.
The service that I provide qualifies as an international service. Therefore, I charge GST to my customer at 0%. Can I claim the GST incurred for providing the international service?
Yes. The input GST can be claimed if you satisfy all the conditions for input tax claim.