Singapore Goods & Services Tax (GST)
The Inland Revenue Authority of Singapore (IRAS) mandates that certain companies must register for GST, while also allowing companies to register voluntarily. All GST-registered businesses are required to file GST returns with IRAS. This article provides a quick guide on:
Prior to 1986, Singapore's corporate income tax rate and top marginal personal income tax rate both stood at 40%. Such high rates were deemed to be uncompetitive. In 1986, Singapore's government introduced GST in order to shift from direct to indirect taxes, in the hope that it would spur growth and improve the country's competitiveness.
Key Points about GST
- Also called value added tax (VAT) in other jurisdictions, GST is a tax on domestic consumption. The current GST rate in Singapore is 7%.
- GST is charged to the end consumer. The business selling the goods or services is responsible for 1) charging and collecting the GST from its customers and 2) paying the tax to IRAS. In effect, the business works as a GST collections agent for IRAS.
- GST is only charged by GST registered businesses. Only businesses that exceed S$1 million in annual taxable turnover are required to register. However, companies with revenues below this threshold can voluntarily register as well.
- GST is also levied on imported goods. In the case of imports, GST is levied by Singapore Customs.
- Certain business types are exempt from GST, including financial services, the sale and lease of residential properties, and the import and local supply of investment-oriented precious metals.
- The export of goods and certain types of services provided to overseas clients are not charged GST.
- A GST-registered company must file a GST return with IRAS on a monthly or quarterly basis.
- The GST that a business collects from customers is called output tax. Conversely, GST paid on a business’s purchases or paid to its suppliers is called its input tax.
- A GST-registered business can claim credit for its GST input tax. Furthermore, input tax can offset output tax. Therefore, GST-registered businesses only pay GST on the amount of “value added” to its products or services which is calculated as the difference between its output and input tax.
GST Registration Requirements
Singapore companies that exceed a certain threshold for their GST-applicable revenue (referred to as taxable turnover) are required by law to register for GST. Other companies that don’t exceed the revenue threshold are not required to register for GST but can still register voluntarily if it suits them. All GST-registered companies are required to charge GST and file GST returns. Once registered, a company must remain registered for at least 2 years.
Mandatory registration threshold
Companies are required to register and collect GST when:
- The taxable turnover for the past 12 months exceeds S$1 million OR
- The company expects to exceed S$1 million in taxable turnover in the next 12 months.
Companies are expected to monitor their taxable turnover at the end of every quarter to determine if they need to register for GST.
Companies that have exceeded S$1 million in taxable turnover during the last 12 months are required to register for GST within 30 days from the end of the last quarter when this event occurred.
Companies that expect to exceed S$1 million in taxable turnover during the next 12 months must register for GST within 30 days of such determination.
Companies with annual taxable turnover less than S$1 million are not required to register for GST; however, they can still register for GST voluntarily if they decide to do so.
As part of voluntary GST registration, the company’s director(s) must complete two e-Learning courses namely Registering for GST and Overview of GST, except if any of the following conditions are true:
- The company director has experience managing other existing GST registered businesses
- The person who prepares the company’s GST returns is an Accredited Tax Adviser (ATA) or Accredited Tax Practitioner (ATP)
- The person who prepares the GST returns has completed the above e-Learning courses within the last two years.
Note that IRAS may impose additional conditions for GST registration and compliance. In addition, it can cancel the company’s GST registration if the company fails to meet any of the conditions.
Exemption from registration
Certain companies that otherwise are subject to mandatory GST registration can apply with IRAS to receive a registration exemption if they satisfy the following criteria:
- At least 90% of the company’s total revenue is from supplies that are not subject to GST i.e. they are “Zero-rated” supplies; and
- The net balance of GST collected for supplies vs GST paid for purchases is negative i.e. the company would have received a GST refund from IRAS as a GST registered business.
Note, similar to non-registered GST companies, exempt companies cannot claim the GST incurred on business purchases. Therefore, if a business expects to receive a credit for the GST it has paid then it must register for GST.
GST Registration Procedure
GST registration is a simple 2-step process as follows:
Step 1: Submit an application for GST registration with IRAS. The company or a designated filing agent (usually the company’s corporate service provider) can submit an online or paper application.
Online applications can be submitted through myTax Portal. Paper applications must be sent to the following address.
55 Newton Road, Revenue House, Singapore 307987
Note that companies are not allowed to charge GST until they have received approval from IRAS.
Step 2: Receive the notification of effective date of registration from IRAS. Once approved, the company will receive a confirmation letter from IRAS confirming that the company is registered for GST. The letter will include the following information:
- The company’s GST Registration Number
- The company’s effective date of GST registration
On the effective date of GST registration, the company must start charging and collecting GST.
Filing GST Tax Returns
GST registered businesses must file a GST F5 tax return to IRAS. The key facts to filing GST returns are as follows:
- GST tax returns must be filed electronically through myTax Portal either on a monthly or quarterly basis.
- If there are no GST transactions during an accounting period, the business must still file a nil return.
- Companies must pay GST to IRAS within 1 month after filing an F5 return.
- Companies must report both their input tax and output tax.
When filing an F5 return, a company must first calculate its net GST by taking the company’s output GST minus its input GST.
- Output tax is the GST that the company collected from its customers.
- Input tax is the GST that the company paid on purchases from suppliers or on imported goods.
If the output tax is greater than the input tax (i.e. negative net GST) then the company must pay the net GST to IRAS. Conversely, if the input tax is greater than the output tax (i.e. positive net GST) then IRAS owes the company a refund.
For example, XYZ Pte Ltd. was charged S$2,000 in GST from suppliers and therefore has an input tax of S$2,000. XYZ Pte Ltd. collected S$1,000 in GST from selling its products to customers in Singapore and therefore has an output tax of S$1,000. In this case, XYZ Pte Ltd. would have a net GST of -S$1,000 and would receive a refund from IRAS. However, if the output tax was S$2,000 and input tax was S$1,000 XYZ Pte Ltd would have to pay a net GST of $1,000 to IRAS.
In general, IRAS will refund GST within 1-3 months of filing the F5 return. To receive a GST refund a company must first meet the following conditions:
- The company has filed all of its GST returns in a timely manner.
- The company must not be under an audit by IRAS.
- The company must not have any outstanding taxes or other payments to pay to IRAS.
For late submissions, IRAS imposes a 5% late payment penalty. In addition, a demand note will be issued to make the outstanding payment. If the company fails to pay after 60 days from the date of the demand note, IRAS may add an additional 2% penalty each month. The 2% penalty is added for every completed month that the tax remains outstanding. The total additional penalty can total up to 50%, thus giving a total maximum penalty of 55% for late GST payments.
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