GST, or Goods and Services Tax, is a consumption tax applied to the supply of goods and services within Singapore and to the import of goods into Singapore. Similar to the Value Added Tax (VAT) used in many other countries, GST is an indirect tax set at 8% of the selling price of goods and services provided by GST-registered businesses in Singapore. As an indirect tax, GST is ultimately borne by the end consumer, meaning it usually does not impact the company’s costs. Instead, businesses act as collection agents for the Singapore tax authorities.
How does GST affect a Singapore company?
Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means no double taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax, and all dividends paid to shareholders are exempt from further taxation. There is no tax on capital gains in Singapore, including gains on the sale of fixed assets and foreign exchange on capital transactions.
Is my company required to register for GST?
Companies qualifying for SFRS for Small Entities must consider several factors before adopting it:
- Transition costs, including training, accounting systems, and software.
- Future plans, such as potential IPOs and business growth.
- Impact on holding companies.
- Financing, as lenders may require full SFRS statements.
Marginal companies close to exceeding the size threshold may benefit from adhering to the full SFRS to avoid transitioning between standards. Companies accustomed to the full SFRS, part of a group, or negatively impacted by simplified accounting elements should also consider sticking with the full SFRS.
In summary, the simplified SFRS for Small Entities is ideal for startups and companies struggling with the full SFRS, especially those not requiring external financial statement usage.
For detailed information, the complete set of Singapore Accounting Standards is available through the Accounting Standards Council of Singapore.
Types of Registration.
Registering for GST is mandatory if:
- From 1 Jan 2019, your taxable turnover exceeds SG$1 million at the end of the calendar year. You must register for GST by 30 Jan, and you will be registered on 1 Mar (retrospective basis).
- You are making sales and reasonably expect your turnover to exceed SG$1 million in the next 12 months (prospective basis). This includes signed agreements/contracts and expected revenue. You must submit the GST application to IRAS within 30 days if your revenue exceeds SG$1 million. Failing to register within the required time frame results in penalties. Anti-avoidance provisions prevent entities from being established solely to stay below the threshold to avoid registration.
Registering for GST is mandatory if:
- From 1 Jan 2019, your taxable turnover exceeds SG$1 million at the end of the calendar year. You must register for GST by 30 Jan, and you will be registered on 1 Mar (retrospective basis).
- You are making sales and reasonably expect your turnover to exceed SG$1 million in the next 12 months (prospective basis). This includes signed agreements/contracts and expected revenue. You must submit the GST application to IRAS within 30 days if your revenue exceeds SG$1 million. Failing to register within the required time frame results in penalties. Anti-avoidance provisions prevent entities from being established solely to stay below the threshold to avoid registration.
If your business only makes zero-rated supplies, you can apply for an exemption from registration, even if your taxable turnover exceeds the registration threshold. IRAS will approve the exemption if more than 90% of your taxable supplies are zero-rated and your input tax is greater than your output tax.
You can cancel your GST registration if your business ceases operations, is sold entirely to another person, or your sales do not exceed SG$1 million. An application form and relevant documents must be submitted to IRAS within 30 days from the date of cessation.
FAQ.
No, your company is required to register for and collect GST only if its annual turnover exceeds SG$1 million or if you voluntarily apply and are approved to become a GST-registered company.
Yes, the GST charged to customers is known as output tax, while the GST paid to suppliers is called input tax. Companies pay the difference between output tax and input tax to the tax authorities.
No, non-GST registered businesses are not allowed to charge or collect GST. It is illegal to do so without being GST registered.
No, export goods and services are zero-rated, meaning GST does not apply.
It depends. Mandatory registration leaves no choice. However, if optional, consider these pros and cons:
Benefits:
1.For the government:
- Generates stable and predictable tax revenue.
- Efficient due to lower administration and collection costs.
- Allows lowering of corporate and personal income taxes, attracting foreign investment and promoting economic growth.
2.For businesses and individuals:
- GST registration signals that a business is established.
- Fairer tax system, taxing only on spending.
- Encourages saving and investment by taxing consumption only.
- Reduces business costs through a multi-stage credit mechanism, with the end-user bearing the tax.
Drawbacks:
- Administrative burden of GST responsibilities.
- Costs of learning GST intricacies or hiring an accountant.
- Increases selling prices by 8%, potentially displeasing non-GST registered customers.
- Can burden lower-income groups, especially during high inflation.
GST applies to taxable supplies, including goods and services supplied within Singapore, excluding exempt supplies. Taxable supplies are either standard-rated (8%) or zero-rated. Most local sales of goods and services are standard-rated. Exports and international services are zero-rated. GST-registered entities making zero-rated supplies can claim input tax on purchases.
GST is not charged on exempt supplies, including the sale/lease of residential land and financial services. Input tax incurred on exempt supplies is not claimable. Out-of-scope supplies include:
- Transfer of business as a going concern.
- Private transactions.
- Third-country sales (outside Singapore).
- Sales within Zero GST Warehouses.
Submit a Singapore Goods and Services registration form (GST F1) with supporting documents to IRAS. Partnerships need an additional form (GST F3) detailing all partners. Overseas companies, group registrations, and divisional registrations have separate procedures/forms. Overseas registrants must appoint a local agent and include a letter with the application form.
The registration process takes about three weeks. Upon successful registration, you will receive a Notification of GST Registration letter with your GST number, effective date, filing frequency, due dates, and other instructions. GST returns must be filed electronically.
Payment:
GST-registered entities must charge GST on goods and services and remit it to IRAS, preferably via GIRO from a Singapore bank account.
Charging GST:
You can charge GST on top of your selling price or include it in the price.
Display and quote GST-inclusive prices publicly; failure to do so is an offence, except for goods/services with a service charge (e.g., in F&B industry).
Invoicing:
Issue a tax invoice to GST-registered customers for input tax claims, containing details of the sale and GST charged. Tax invoices must be retained for at least five years. Issue within 30 days of the supply. Not needed for zero-rated, exempt, or non-GST registered customer supplies.
Issue a serially printed receipt if no tax/simplified tax invoice is provided when payment is received.
Record-Keeping:
Keep records of all transactions affecting GST declarations. Maintain a GST account summarizing input and output tax totals for each accounting period.
Input Tax Claims:
Claim input tax based on the date of the tax invoice or import permits.
GST-registered entities must submit GST F5 returns to IRAS based on their accounting cycle, typically quarterly. Returns include total local sales, exports, purchases from GST-registered entities, GST collected, and GST claimed. E-file GST F5 returns online within one month after the accounting period ends. File ‘nil’ returns if no tax is due. Late filings incur penalties.
Pay net GST within one month after the accounting period ends. Late payments incur penalties. GST refunds are processed within 30 days of return receipt.
The Singapore Government offers several GST assistance schemes to ease business cash flow and foster a pro-business environment, including:
- Tourist Refund Scheme: Refunds GST paid by tourists on goods bought in Singapore from participating retailers.
- Cash Accounting Scheme: For small businesses with annual sales under SG$1 million.
- Gross Margin Scheme: GST is charged only on the gross margin of goods.
- Major Exporter Scheme (MES): Aids cash flow for major exporters with significant imports.
- Hand-Carried Exports Scheme: Allows zero-rating for goods hand-carried out of Singapore via Changi Airport.
- Zero GST Warehouse Scheme: Transforms warehouses into zero-GST zones to minimize red tape.
- Discounted Sale Price Scheme: Charges 50% GST on second-hand/used vehicles.
- Import GST Deferment Scheme (IGDS): Defers GST payment on imports until monthly GST returns are due.
- Industry-Specific Schemes: Various GST schemes tailored to specific industries like marine and logistics.
