Singapore Budget 2018 affecting GST

GST on imported Services

With effect from 1 Jan 2020, GST will be levied on imported services, via the following:

(a) Reverse charge regime for Business-to-Business (“B2B”) supplies of imported services; and

(b) Overseas vendor registration regime for Business-to-Consumer (“B2C”) supplies of imported digital services. 

Reverse Charge Regime

Changes in GST Act due to Budget 2018 introduces the concept of Reversal Charge Regime and Reversal Charge (RC) Business. 

RC Business is a person who is subject to reverse charge.

If you are a GST-registered person who procures services from overseas suppliers, you are an RC Business when: 

(a) You are not entitled to full input tax credit; or 

(b) You belong to a GST group that is not entitled to full input tax credit.

Full input tax credit test

You would not be entitled to full input tax credit, if you fall under either of the following circumstances:

(a) You carry out non-business activities (i.e. provide free or subsidised services) ; or

(b) You fail the De Minimis Rule under regulation 28 of the GST (General) Regulations at the end of any prescribed accounting period, except if:

(1) You make only exempt supplies listed in regulation 33 of the GST (General) Regulations (“regulation 33 exempt supplies”) and the nature of your business is not one of those listed in regulation 34 of the GST (General) Regulations (“regulation 34 business”); or

(2) Any provision in the GST legislation grants you the right to claim your input tax in full.

The De Minimis Rule is satisfied if the total value of all exempt supplies made does not exceed:

(a) an average of S$40,000 a month; and
(b) 5% of the total value of all taxable and exempt supplies made in that period.

If you are a non-GST registered person who procures services from overseas suppliers, you would be liable for GST registration by virtue of the reverse charge rules if you satisfy the following conditions:

(a) Your imported services which are within the scope of reverse charge exceed S$1 million in a 12-month period (under either the retrospective or prospective basis); and

(b) You would not be entitled to full input tax credit if you were GST registered.

If a non-GST registered person becomes registered or liable for registration by virtue of the reverse charge rules, he must comply with the responsibilities and obligations of a GST-registered person.

Imported services

RC Businesses must account for GST on all imported services other than:  

(a) services that fall within the description of exempt supplies under the Fourth Schedule to the GST Act; 

(b) services that qualify for zero-rating under section 21(3) of the GST Act had the services been made to them by a taxable person belonging in Singapore; 

(c) services that are directly attributable to taxable supplies (this exclusion is only applicable to RC Businesses that are not prescribed a fixed input tax recovery rate or on special input tax recovery formula); and 

(d) the salaries, wages and interest cost components, including their proportionate mark-up in accordance with transfer pricing policy, of cost allocations in inter-branch and intra-GST group transactions

Overseas vendor registration regime for Business-to-Consumer (“B2C”) supplies of imported digital services

If you belong outside Singapore, you are required to register for GST in Singapore if you:

(a) have an annual global turnover exceeding $1 million; and

(b) make B2C supplies of digital services to customers in Singapore exceeding $100,000.

Once registered for GST, you are required to charge and account for GST on B2C supplies of digital services made to customers in Singapore.

If you are an electronic marketplace operator

Under certain conditions, whether you are a local or an overseas operator of an electronic marketplace, you may be regarded as the supplier of the digital services made by the overseas suppliers through your marketplace.

In such cases, you are required to include the value of these services to determine your GST registration liability. If you are liable for GST registration or are already GST-registered, you are required to charge and account for GST on B2C supplies of digital services made through your marketplace to customers in Singapore on behalf of the overseas suppliers, in addition to digital services made by you directly to customers in Singapore.

To ease extra-territorial compliance burden, if you are an overseas operator, you will be registered under a simplified regime, with reduced registration and reporting requirements.

Singapore Budget 2018 affecting companies tax

Corporate Income Tax (“CIT”) Rebate

Current treatment

For YA2018, CIT rebate is 20% of tax payable, capped at $10,000

New treatment

For YA2018, the CIT rebate will be enhanced to 40% of tax payable, with enhanced cap at $15,000. 

For YA2019, CIT rebate at a rate of 20% of tax payable, capped at $10,000.

Tax Deduction For Qualifying Expenditure On Qualifying Research And Development (“R&D”) Projects Performed In Singapore

Current treatment

Businesses that have incurred qualifying expenditure on qualifying R&D projects performed in Singapore can claim the following: 

a) 150% tax deduction for staff costs and consumables incurred, and 

b) 100% tax deduction for other qualifying expenditure. 

New treatment

Businesses that have incurred qualifying expenditure on qualifying R&D projects performed in Singapore can claim the following: 

a) 250% tax deduction for staff costs and consumables incurred, and 

b) 100% tax deduction for other qualifying expenditure. 

Period: YA2019 to YA2025.

Tax Deduction For Intellectual Property (IP) Registration Cost

Current treatment

100% tax deduction on such costs. 

Period: Until YA2020. 

New treatment

Increase in tax deduction from 100% to 200% for the first $100,000 of qualifying IP registration costs incurred for each YA. This change will take effect from YA2019 to YA2025.

Period: From YA2019 to YA2025

Tax deduction for costs on IP in-licensing

Current treatment

100% tax deduction on such costs. 

Period: Until YA2020. 

New treatment

Increase in tax deduction from 100% to 200% for the first $100,000 of qualifying IP registration costs incurred for each YA. This change will take effect from YA2019 to YA2025.

Period: From YA2019 to YA2025

Double Tax Deduction for Internationalisation (“DTDi”) scheme

Current treatment

200% tax deduction , on qualifying market expansion and investment development expenses, subject to approval from IE Singapore or STB. 

No prior approval is needed from IE Singapore or STB for tax deduction on the first $100,000 of qualifying expenses incurred on the following activities for each YA: 

a) Overseas business development trips/missions;

b) Overseas investment study trips/missions; 

c) Participation in overseas trade fairs; and 

d) Participation in approved local trade fairs.

New treatment

200% tax deduction , on qualifying market expansion and investment development expenses, subject to approval from IE Singapore or STB. 

No prior approval is needed from IE Singapore or STB for tax deduction on the first $150,000 of qualifying expenses incurred on the following activities for each YA: 

a) Overseas business development trips/missions;

b) Overseas investment study trips/missions; 

c) Participation in overseas trade fairs; and 

d) Participation in approved local trade fairs. 

This change will apply to qualifying expenses incurred on or after YA2019. 

IE and STB will release further details of the change by April 2018.

Start-Up Tax Exemption ("SUTE") scheme

Current treatment

A new company can, subject to conditions, qualify for, in each of the first three YAs: 

a) 100% exemption on the first $100,000 of normal chargeable income; and 

b) 50% exemption on the next $200,000 of normal chargeable income.

New treatment

A new company can, subject to conditions, qualify for, in each of the first three YAs: 

a) 75% exemption on the first $100,000 of normal chargeable income; and 

b) 50% exemption on the next $100,000 of normal chargeable income.

This change will take effect on or after YA2020 for all qualifying companies under the scheme. 

For example, if a qualifying company’s first YA is 2019, the current SUTE parameters will apply in YA2019 while the new parameters will apply in YAs 2020 and 2021.

Partial Tax Exemption (“PTE”) scheme

Current treatment

All companies (excluding those that qualify for the SUTE scheme) and bodies of persons, can qualify for, in each YA: 

a) 75% exemption on the first $10,000 of normal chargeable income; and

b) 50% exemption on the next $290,000 of normal chargeable income.

New treatment

All companies (excluding those that qualify for the SUTE scheme) and bodies of persons, can qualify for, in each YA: 

a) 75% exemption on the first $10,000 of normal chargeable income; and

b) 50% exemption on the next $190,000 of normal chargeable income.

All other conditions of the scheme remain unchanged. 

This change will take effect on or after YA2020 for all companies (excluding those that qualify for the SUTE scheme) and bodies of persons. 

Tax Deduction for Qualifying Donations

Current treatment

250% tax deduction for qualifying donations made to Institutions of a Public Character (“IPCs”) and other qualifying recipients 

Period: 1 January 2016 to 31 December 2018. 

New treatment

250% tax deduction for qualifying donations made to Institutions of a Public Character (“IPCs”) and other qualifying recipients 

Period: 1 January 2016 to 31 December 2021. 

Business and IPC Partnership Scheme (“BIPS”)

Current treatment

A qualifying person can, subject to conditions, enjoy a total of 250% tax deduction on qualifying expenditure such as wages incurred by him in respect of 

a) The provision of services by his qualifying employee to an IPC during that period; or 

b) The secondment of his qualifying employee to an IPC during that period.

Period: 1 July 2016 to 31 December 2018 

New treatment

A qualifying person can, subject to conditions, enjoy a total of 250% tax deduction on qualifying expenditure such as wages incurred by him in respect of 

a) The provision of services by his qualifying employee to an IPC during that period; or 

b) The secondment of his qualifying employee to an IPC during that period.

Period: 1 July 2016 to 31 December 2021

GST on imported services

Current treatment

GST is not applicable on imported services provided by an overseas supplier which does not have an establishment in Singapore.

New treatment

B2B imported services will be taxed via a reverse charge mechanism.

Only businesses that:

(i) make exempt supplies, or

(ii) do not make any taxable supplies need to apply reverse charge.

The reverse charge mechanism requires the local business customer to account for GST to IRAS on the services it imports. The local business customer can in turn claim the GST accounted for as its input tax, subject to the GST input tax recovery rules.

The taxation of B2C imported services will take effect through an Overseas Vendor Registration (OVR) mode.

This requires overseas suppliers and electronic marketplace operators which make significant supplies of digital services to local consumers to register with IRAS for GST.

Singapore corporate tax exemptions caa 18 Feb 2018

Partial tax exemption for companies (from YA 2020)

Chargeable income % exempted from Tax Amount exempted from Tax
First $10,000 @75% =$7,500
Next $190,000 @50% =$95,000
Total $200,000 =$102,500

Tax exemption scheme for new start-up companies (where any of the first 3 YAs falls in or after YA 2020)

Chargeable income % exempted from Tax Amount exempted from Tax
First $100,000 @75% =$75,000
Next $100,000 @50% =$50,000
Total $200,000 =$125,000

Partial tax exemption for companies (YA 2010 to YA 2019)

Chargeable income % exempted from Tax Amount exempted from Tax
First $10,000 @75% =$7,500
Next $290,000 @50% =$145,000
Total $300,000 =$152,500

Tax exemption scheme for new start-up companies (where any of the first 3 YAs falls in YA 2010 to YA 2019)

Chargeable income % exempted from Tax Amount exempted from Tax
First $100,000 @100% =$100,000
Next $200,000 @50% =$100,000
Total $300,000 =$200,000
YA 2019 Companies will be granted a 20% Corporate Income Tax Rebate capped at $10,000. YA 2018 Companies will be granted a 40% Corporate Income Tax Rebate capped at $15,000