Effective from 1 January 2020, Goods and Services Tax (GST) will be imposed on imported services such as IT services, accounting services and marketing services etc. As digital services are easily available and accessible to anyone, customer may choose to engage overseas suppliers over local suppliers due to GST. To ensure GST treatment is fair for all services consumed in Singapore, reverse charge regime is implemented to tax imported services.
The following regimes are:
- Reverse Charge Regimes (RC) for Business to Business (B2B) supplies of imported services
- Overseas vendor registration regimes for Business to Consumers (B2C) supplies of digital services
For avoidance of doubt, this regime does not affect e-commerce for goods such as online shopping.
Reverse Charge Regimes for B2B
Local GST-registered Company that uses services from an overseas supplier is required to account for GST on the imported services. They are supposed to account for the GST as if they were the suppliers under output tax. Under normal input tax recovery rules, company are also entitled to claim the corresponding GST as the input tax.
A company that is not GST registered before 1 Jan 2020, may be required to register for GST, if the total value of the imported service exceeds $1 million within a period of 12 months and under the circumstances that you would not be entitled for full input tax credit even if you are GST registered.
Once the company is register for GST, you will required to file GST on both your taxable supplies and imported services which are subjected to reverse charge.
Overseas Vendor Registration Regimes for B2C
Overseas vendor are required to register for GST in Singapore if they have the following:
- Annual global revenue exceed $1 million; and
- Provide digital services to consumers in Singapore exceeding $100,000.
Once registered, you are required to charge and account for GST on the B2C supplies of digital services make to consumers in Singapore.
A local or overseas Electronics marketplace operator may be regarded as a supplier of digital services, even if when the product comes from an overseas supplier. The approach is as such that the electronics marketplace serves as a platform for the overseas suppliers to reach out to Singapore consumers. However, the operator has to meet certain conditions to be regarded as suppliers.
Some conditions are:
- The operators are in charge of the billing and delivery of the products
- Settings of the terms and conditions under which the supply is made
- The information on the sale invoice is reflecting the operator’s details
- Both the operator and merchant agree that the marketplace is liable for GST
An electronic marketplace may not be regarded as the supplier only if none of the above-mentioned conditions are satisfied.
Once an electronic marketplace operator is regarded as the supplier under the overseas vendor registration regime, the operator is required to charge and account for GST on behalf of the overseas or local suppliers and also to the customer who purchased the products in the marketplace.
To ensure your company stays compliant with the new GST rule, you may adopt the following practices:
- Maintain records of imported services
- Identify the RC treatment for transaction whether they fall in or outside the scope of RC
- Have the accountant to be update by the new RC regimes
- Update new GST return process and templates
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