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.
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.