IRAS has recently updated its e-Tax Guide on “Clarification on “Directly in Connection With” and “Directly Benefit”. We highlight the major amendment to this e-Tax Guide below:
- An example was added to illustrate what constitutes a supply of service that is directly in connection with goods or land:
- Fire insurance for a building. In the event of a fire, the policyholder is compensated for the damages to the building caused by the fire. The service provided by the insurance company protects the value of the building.
- Interior design services for a specific property.
2. The provision of a mortgage loan is considered a supply that is directly in connection with the land when the loan is provided specifically to enable the purchaser to own the property.
3. Services supplied are regarded as directly in connection with goods or land only if:
(a) the goods or land exist at the time the services are performed. For example, the granting of a right to a patent (which is a supply of service) cannot be regarded as supplied directly in connection with goods manufactured using the patent as the goods do not yet exist when the patent is granted; and
(b) the services relate to identifiable goods or land. Goods are identifiable by model, type or serial number whereas land is identifiable by address or legal description. Hence, if the services relate to goods or land in general, the services will not be regarded as directly in connection with any goods or land.
4. Where a transaction comprises multiple supplies of services, each supply should be examined on its own to determine whether the supply of services is considered directly in connection with goods or lands. If it is a single supply of services consisting of a number of service elements, the entire supply would be directly in connection with goods or land if the dominant service element is regarded as directly in connection with goods or land.
5. A local beneficiary who wishes to avail himself of the administrative concession that allows him to claim the GST charged by the local supplier to the overseas customer as its input tax claim is required to self-assess and ensure the prescribed conditions are satisfied and it’s been clarified that the claim should be made within 5 years from the end of the prescribed accounting period in which the payment of the tax was made or the date when the invoice was issued, whichever is the later.
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