GST On Imported Services From Jan 1, 2020
Consumers and businesses who buy imported services from suppliers based overseas which have no establishments in Singapore will have to pay goods and services tax (GST) from Jan 1, 2020 onward.
The GST will be levied on two types of services: business-to-business (B2B), such as marketing services, accounting services and IT services; and business-to-consumers (B2C), including video and music streaming services, apps and online subscription fees.
It however, does not affect e-commerce for goods such as online shopping, while overseas suppliers which have establishments in Singapore do not need to pay the new tax.
The move comes after industry consultations by the Ministry of Finance and the Inland Revenue Authority of Singapore (Iras).
B2B imported services will be taxed via a reverse charge mechanism. Only businesses that make exempt supplies, or do not make any taxable supplies need to apply reverse charge.
Reverse charges and overseas vendor registration are commonly used in other places that impose GST on imported services, for example, Australia, Japan, South Korea and New Zealand.
The majority of businesses make taxable supplies and thus would not be affected by this reverse charge mechanism.
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.
Under this model, overseas vendors whose annual global turnover exceeds $1 million and who make more than $100,000 in the sale of digital services to consumers in Singapore must pay GST.
Overseas suppliers and electronic marketplace operators such as app stores which make significant supplies of digital services to Singapore customers must register with IRAS. Once they have registered, they will collect GST for IRAS on their B2C supplies of digital services.
GST is levied on the import of all goods into Singapore, except where the goods worth less than $400 are imported via air or post, such as via online shopping.
The Government is reviewing international developments before deciding on measures to take regarding the collection of GST on such low-value imported goods.
A 2% rate hike from 7% to 9% is planned to be introduced sometime between 2021 and 2025, depending on Singapore’s economy, government spending and revenue from other taxes.