Claiming Back GST Paid on Non-Residential Property Purchase

Purchasing a non-residential property in Singapore can be a costly affair, especially when factoring in additional costs such as stamp duty and agent’s fees. However, businesses can recoup some of these costs by claiming back the 7% Goods and Services Tax (GST) incurred on the purchase price of the property. Where the property is used for business purposes or as an investment property to generate rental income, you may make an input tax claim from the Inland Revenue Authority of Singapore (IRAS).

Types of non-residential properties eligible for GST refunds

To be eligible for a GST refund, the non-residential property must be used solely for business purposes and directly attributable to taxable supplies. For example, the non-residential property is used as a business premise where the sale of goods or services from the business activities carried out in the premise is subject to GST or leased out for rental income if you are an investment holding company where the rental income is subject to GST too. This means that the property cannot be used for both business and private purposes. Examples of non-residential properties include commercial and industrial properties, guest houses, chalets, canteen in halls of residences and lower floors of shophouses approved for non-residential use. However, if the property is only partially used for business purposes, only a proportionate refund will be given. Do note that refunds are not available for residential properties such as serviced apartments, student’s hostels and workers’ dormitories.

In order to claim input tax, your business must first be GST-registered. You may then submit the GST F5 form along with relevant supporting documents such as valid tax invoices to IRAS when filing your GST returns. Bear in mind that you can only claim input tax in the accounting period corresponding to the date of the invoice. However, you may make a claim on input tax incurred before GST registration date, subject to satisfying the pre-registration GST rules.

Generally, businesses can expect to receive the payment within 30 days from the date of receipt of the return, except where the company is selected for GST audit.

Pre-registration GST claims

Apart from GST refunds, there may be instances where non-residential property is acquired before your GST registration. In this case, this falls under pre-registration GST. If you are looking to claim pre-registration GST, it will depend on whether:

1. The property is acquired within 6 months before GST registration

The GST incurred can be claimed in full if the property is still held at the point of GST registration and subject to satisfying general input tax rules.

2. The property is acquired more than 6 months before GST registration

If you have not started using the business premise or leasing it out (i.e. the property is left vacant or undergoing renovation) and you still hold the property as at date of GST registration, as an administrative concession, IRAS allows the GST incurred to be claimed in full, subject to satisfying general input tax rules.

On the other hand, if you have started using the business premise or leasing it out before date of GST registration, you will not be able to claim the GST incurred in full. Instead, you will have to apportion the GST incurred and only the portion relating to supplies after GST registration is claimable. You may use the below formula to calculate the input tax allowable.

Input tax allowable = GST on property – (annual value of property/365 x period property put into use) x 7%

Do your due diligence to ensure that the input tax is claimed in accordance with the GST legislation. Should your organisation be selected for a GST audit, this will be one of the areas that IRAS’ tax officers will review and check for accuracy.

What is a GST audit?

A GST audit is an examination of your financial records to ensure that you have accounted for GST correctly in your GST returns. An IRAS officer will notify you of the audit in advance and will request for certain documents during the course of the audit. Some of these include sales and purchases listings, invoices and export documents. Prior to the audit, you will be advised to conduct a self-review on your past GST returns.

Audits with the IRAS can be done through email, letter and phone interviews. However, do note that IRAS may also conduct on-site visits to your premises. Rest assured you will be informed beforehand of the field visit. During this period, it is important to cooperate with the tax officers for the audit to proceed as smoothly as possible. This means:

  • Giving them full access to your premises, records and documents
  • Providing a room or working space to allow the auditors to examine the books and records
  • Allowing employees to be interviewed
  • Allowing the tax officers to make copies of records and documents
  • Disclosing irregularities and omissions in a timely manner

The audit process usually takes around 12 months, at which you will be notified of the outcome either in writing or during a meeting with IRAS. It can be shorter or longer depending on the complexity of your case and the promptness of your response to the IRAS’ requests.

If the IRAS finds that you have made a mistake, you may be imposed a penalty of up to two times the amount of tax undercharged or over-claimed from the submission of incorrect GST returns. Voluntary disclosure of errors, however, can reduce the penalty. This is why the initial self-review is extremely important. If you are unsure about anything or need assistance preparing for the audit, you can seek expert help from professional tax services.

How Chartsworth can help

Starting with the preparation and filing of the GST F5 form, Chartsworth’s team of experienced professionals will ensure that your returns are reported correctly. Should you be selected for an audit, your organisation will be more than ready to present the necessary documentation to the tax officers. Whether you need GST filing or tax planning services, Chartsworth has a range of tailored tax solutions for your business. Contact us today to find out more.