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FRS 115 – Specific Area: Price Concessions

A company may give discount to a customer whether explicitly stated in the contract or implicitly where the customer a valid expectation arising from past business practices.

Depending on the jurisdiction, industry or customer this offer may be referred to as a discount, rebate, refund or credit.

FRS 115 deems this to be an variable consideration and the company shall estimate an amount of variable consideration by using either of the following methods, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled:

(a) The expected value—the expected value is the sum of probability-weighted amounts in a range of possible consideration amounts. An expected value may be an appropriate estimate of the amount of variable consideration if an entity has a large number of contracts with similar characteristics.

(b) The most likely amount—the most likely amount is the single most likely amount in a range of possible consideration amounts (ie the single most likely outcome of the contract). The most likely amount may be an appropriate estimate of the amount of variable consideration if the contract has only two possible outcomes (for example, an entity either achieves a performance bonus or does not. Continue reading “FRS 115 – Specific Area: Price Concessions”

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FRS 115 – Specific Area: Sales With Rights To Returns And Refund liabilities

An entity shall recognise a refund liability if the entity receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received (or receivable) for which the entity does not expect to be entitled (ie amounts not included in the transaction price). The refund liability (and corresponding change in the transaction price and, therefore, the contract liability) shall be updated at the end of each reporting period for changes in circumstances. Continue reading “FRS 115 – Specific Area: Sales With Rights To Returns And Refund liabilities”

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FRS 115 – Specific Area: Customer Loyalty Program

FRS 115 supersedes INT FRS 113 Customer loyalty programs.

Similar to INT FRS 113, an entity should determine that whether the loyalty program is a performance obligation.

If the program is a performance obligation, the entity should allocate the transaction price to the program based on a relative stand-alone selling price basis. If the stand-alone selling price for a customer’s option to acquire additional goods or services is not directly observable, an entity shall estimate it. Continue reading “FRS 115 – Specific Area: Customer Loyalty Program”

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FRS 115 – Specific Area: Differences between “Output method” per FRS 115 vs “surveys of work performed”/ “Surveyor method” per FRS 11

Under FRS 11 Construction Contracts , both contract revenue and contract costs that are accounted for using the POC method are recognised with reference to the stage of completion.

Under FRS 115 Revenue from Contracts with Customers, revenue is recognised using a measure depicting performance using an input or an output measure. A contractor applying the input measure excludes the effect of inputs that do not depict its performance in transferring control of goods or services to customer (e.g. unexpected amounts of wasted materials, labour and any uninstalled materials).

Costs on the other hand, are expensed as incurred unless they qualify to be capitalised as an asset under another standard (e.g. inventory, property, plant and equipment) or they relate to incremental cost to obtain the contract or future performance. Continue reading “FRS 115 – Specific Area: Differences between “Output method” per FRS 115 vs “surveys of work performed”/ “Surveyor method” per FRS 11”

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FRS 115 Revenue from Contracts with Customers

FRS 115 Revenue from Contracts with Customers was issued on 19 Nov 2014 but the effective date was delayed until 1 Jan 2018. It supersede FRS 11 Construction Contracts and FRS 18 Revenue.

FRS 115: Five-Step Model

FRS 115 applies a five-step model to determine whether a contract falls within its scope, and also the timing and quantum of revenue recognition.

  1. Identifies whether there is a contract with a customer.
  2. Identifies the separate performance obligations.
  3. Determines the transaction price.
  4. Allocates the transaction price to the separate performance obligations.
  5. Recognise revenue when (or as) the entity satisfies a performance obligation.

Continue reading “FRS 115 Revenue from Contracts with Customers”

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Financial Reporting Standard – FRS 116 Leases

This standard is released on 30 June 2016 and is effective for annual periods beginning on or after 1 January 2019.
This standard removes the concept of operating and finances lease for lessee and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Continue reading “Financial Reporting Standard – FRS 116 Leases”

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Singapore Corporate Tax Rate

When is the company taxed

For income earned in the financial year known as the “basis period”, it will be taxed in the following year.

E.g. This means that income earned in the financial year 2016 will be taxed in 2017.

Basis Period and Year of Assessment

For assessment, the term year of assessment is used. Using the same example as above, 2017 is the Year of Assessment (YA). In other words, the YA is the year in which your income is assessed to tax.

Corporate Tax Rate

With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.

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Singapore tax rate on dividend income

As Singapore adopts a one-tier corporate tax system, there is no tax on dividend income from Singapore resident company.

If a Singapore company received foreign-sourced dividend income, it will be subjected to tax unless all of the following three conditions are met:

  1. The highest corporate tax rate (headline tax rate) of the foreign jurisdiction from which the income is received is at least 15% at the time the foreign income is received in Singapore;
  2. The foreign income had been subjected to tax in the foreign jurisdiction from which they were received. The rate at which the foreign income was taxed can be different from the headline tax rate; and
  3. The Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
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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.

Update:

As of 16 February 2021, Budget 2021: 

GST to be extended to low-value and non-digital imports from 2023. The extension of the Goods and Services Tax to low-value imported goods and non-digital services follows from an earlier move to impose the same tax on imported digital services.