As of 1 January 2023, the Goods and Services Tax (GST) rate in Singapore has increased from 7% to 8%. With the next GST hike slated to take place in 2024, businesses as well as individual consumers would benefit from knowing what changes are underway and how can your business prepare for the GST rate increase. One area that will see changes is the GST payable on low value goods imports.
Up until the end of 2022, low value goods purchased within Singapore were subject to the prevalent GST, while the low value goods that were procured from overseas and imported into Singapore via air or post were not subject to GST. This has put the local GST-registered suppliers in a disadvantaged position.
Business-to-consumer (B2C) digital services imports were also subject to GST through Overseas Vendor Registration (OVR).
As of 2023, GST applies to imported low value goods, imported digital services, as well as imported non-digital services and B2C transactions by way of the OVR. This means all business-to-business (B2B) and B2C digital and non-digital imported services will be taxed, and now GST applies to all low value goods within Singapore whether they’re obtained locally or imported. Those importing low value goods valued SGD400 or below into Singapore through air or post will be required to pay GST.
According to the government, these changes will create an even playing field for local GST-registered businesses to compete effectively with overseas businesses on goods and services consumed in Singapore, and our GST system will remain fair even amidst the digital economy growth.
All companies in Singapore are required to prepare annual financial statements within 6 months after FYE. A good set of financial statements are prepared in accordance with Singapore Financial Reporting Standards (SFRS) and should include a statement by directors, statement of comprehensive income, statement of financial position, statement of changes in equity, statement of changes in cash flow and notes.
Financial statements are one of the most important reports for your company. It is relied upon by the shareholders to obtain an accurate picture of the company’s performance and financial health, as well as external shareholders including banks for the purpose of assessing the loan eligibility of the company as a borrower, government agencies for grant eligibility or award of tender, and many more.
If you have any questions or concerns, don’t hesitate to consult with qualified accounting and financial statement services for more information.
As per the e-tax guide by the Inland Revenue Authority of Singapore (IRAS), low value goods are defined at the point of sale as:
Point of sale for low value goods is defined as the time at which an order confirmation is issued by the OVR Vendor or such other time as agreed with the Comptroller.
The following groups will have to comply with the GST changes for low value goods as follows as per IRAS guidelines:
Suppliers of low value goods from outside of Singapore are required to register for GST in Singapore if they:
Once the suppliers have registered for GST, they are required to charge and account for GST on B2C supplies of low value goods to Singapore.
Local or overseas operators of an electronic marketplace may be regarded as the supplier of the low-value goods supplied by the local and overseas suppliers through the marketplace.
Those who are local or overseas redeliverers may also be regarded as the supplier of low-value goods which they assist to purchase and/or deliver to customers in Singapore, under certain conditions.
In such cases, they are required to include the value of these supplies of low-value goods to determine their GST registration liability. If they are liable for GST registration or are already GST-registered, they are required to charge and account for GST on B2C supplies of low-value goods, on behalf of the local and overseas suppliers.
Presently, local suppliers (GST-registered and non-GST registered) that store their goods abroad in overseas warehouses do not have to charge GST when selling the goods to customers in Singapore. The goods are outside Singapore at the time of supply hence it’s considered outside the purview of GST – allowing some degree of flexibility and cost savings.
Going forward, direct sales of low value goods made directly by local and overseas suppliers to local customers that are not GST-registered will now be subject to GST. Direct sales refer to sales made directly to customers including through supplier’s own website and exclude sales made through electronic platform or redeliverer. Here are the implications to local suppliers:
This group will need to take note of the revised import procedures and permit requirements by referring to the IRAS guidelines slide and the FAQ for transporters.
Newly registered entities under the OVR regime will need to make changes to their system and processes to accurately identify, capture and account for GST on supplies of low value goods and remote services.
They can refer to the following preparation checklists:
To ease compliance burden, overseas suppliers, electronic marketplace operators or redeliverers will be registered under a simplified regime, with reduced registration and reporting requirements. Under this regime, no input tax claims incurred on taxable purchases made in Singapore are allowed, i.e. the companies would only have output tax but not input tax in its GST returns.
For GST registration, overseas OVR vendors can submit an online GST registration application form. The following documents are required:
(i) Declaration Form signed by the director, partner, or sole-proprietor; and
(ii) Certificate of Incorporation, translated into English and notarised (the certificate must include the entity name, date of incorporation, and country of incorporation).
Appointing a local agent to manage your tax affairs in Singapore is not mandatory, and a guarantee is not required during the registration process unless you are applying for voluntary GST registration. However, if you prefer to have a local agent handle your GST matters, you may choose to do so.
Upon registering for GST, it is necessary to impose the tax on all taxable supplies, including the B2C supplies of low-value goods. During each quarter, you are only required to report the value of supplies made and the amount of GST collected.
Overseas OVR vendors who have registered under the simplified payment scheme are required to file a simplified GST return that includes only certain details. The due date for filing a GST return and making payment for the taxes due is one month from the end of each accounting period, which can be easily done online and by electronic transfer. For those making payments via telegraphic transfer, it is recommended that businesses make their remittance at least one week before the due date.
Apart from the simplified return, the OVR vendors are also not required to print the customers’ GST registration number on sales invoice issued and display GST-inclusive prices.
A GST-registered customer subject to reverse charge (“RC business”) should perform reverse charge on low value goods where necessary. This requirement is applicable to all low value goods and includes goods purchased from local and overseas suppliers, electronic marketplace operators and redeliverers, regardless of their GST registration.
An RC business refers to GST-registered person who procures low value goods, and:
(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.
As an RC Business, you must account for GST on the low value goods with effect from 1 Jan 2023 as if you were the supplier, and in return you can claim the GST accounted for on low value goods as your input tax.
Here are some of the examples of RC Businesses given by IRAS:
Make sense of the new rules and regulations, and navigate GST changes to low value goods imports by engaging an accounting service provider for guidance. Beyond accounting services, Chartsworth is well-experienced in assisting clients through tax changes in order to stay compliant with the legal requirements in Singapore. Our team of Chartered Accountants (CA) is equipped with up-to-date knowledge and financial expertise to offer the necessary advice you need.
Get in touch with our team today to learn more about GST changes.