Singapore GST – GST Treatment for entities adopting Financial Report Standard (“FRS”) 116

The Accounting Standards Council issued FRS 116 on 30 Jun 2016 and SFRS(I) 16 on 29 Dec 2017. FRS 116 / SFRS(I) 16 applies to entities with effect from annual reporting periods beginning on or after 1 Jan 2019. Early application is permitted with application of FRS 115 / SFRS(I) 15 Revenue from Contracts with Customers. 2.2

With the adoption of FRS 116 / SFRS(I) 16 for accounting purposes, the Comptroller of GST (“CGST”) will apply the following tax treatment:

For GST purposes, a lease is treated as:

(a) a supply of goods if the possession of the goods is transferred under an agreement which expressly contemplates that the property (i.e. ownership or title) will pass at some time in the future . For example, goods sold under a hire purchase agreement is regarded as a supply of goods since the property/title to the goods will pass to the hirer/lessee when he pays the last instalment or exercises the option to purchase (for more information on the GST treatment of hire purchase agreements, please refer to the e-Tax guide “GST Treatment of Hire Purchase Agreements and Financing Instruments (Second Edition)”); or

(b) a supply of services if only the possession of the goods is transferred, without any provision for possible future transfer of ownership of the goods

The above treatment will not change even with the requirement for lessees to apply a single lessee accounting model under FRS 116.

Although the lessee is required to recognise the leased goods as his assets, if the lease agreement does not contemplate the transfer of property to the lessee, there is no supply made by the lessee when the lessee returns the goods without any consideration to the lessor at the end of the lease term.

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