Category Archives: Goods & Services Tax

Singapore GST – Amendment to the e-Tax Guide on the Use of Business Premises by Third Party for Free

The IRAS has amended its e-Tax Guide on “GST: Guide on the Use of Business Premises by Third Party for Free” on 19 June 2017 by inserting the following example:

Free Occupation by Canteen Operator Engaged to Provide Canteen Catering Services 

A company has engaged a canteen operator to provide canteen catering services at its premises (i.e. in-house canteen) under a service agreement and pays a fee to the canteen operator in return for his services.  The contract does not grant or assign any lease or license or any right to occupy land to the canteen operator. The operating hours, type of food and drinks to be served in the canteen and the food pricing are generally fixed in the contract.  Where the operations of the company’s business make it necessary for the company to provide an in-house canteen to its employees and the canteen operator is merely occupying the canteen space for the purpose of providing his contracted services to the company, the company need not deem a supply on the free use of canteen space.

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Singapore GST – Public Consultation on the Draft GST e-Tax Guide on Customer Accounting for Prescribed Goods

On 24 April 2017, IRAS has initiated a public consultation exercise to seek feedback from its Draft e-Tax Guide on GST-registered businesses dealing in prescribed goods on the implementation of customer accounting, so as to facilitate a smooth transition into customer accounting come 1 Jan 2018.

What is GST customer accounting?

IRAS is planning to implement GST customer accounting from 1 January 2018 to better address non-compliance relating to transactions of the prescribed goods – mobile phones, memory cards, and off-the-shelf software if the GST-exclusive value of the sale exceeds $5,000 in a single invoice.

If a GST-registered trader makes a taxable supply to a GST-registered customer, it is the GST-registered customer who will account for the output tax on the supply on behalf of the supplier.  At the same time, the GST-registered customer will be bale to claim input tax on this purchase if it is for his business use and the making of his taxable supply.


De Minimis Threshold – $5,000

The new Customer accounting requirement is applicable only if the sales of the prescribed goods to a GST-registered customer for his business use exceeds the de minimis threshold of $5,000 in GST-exclusive value..  This means that if the sales do not exceed this threshold, the new Customer accounting requirement will not apply.

The GST-registered supplier should instead standard-rate the supply, account for the GST output tax and issue a tax invoice to his customer as before.

Discounts given on your sales

If a GST-registered supplier offers an unconditional discount on the price of the prescribed goods sold to his GST-registered customer, he should use the discounted GST-exclusive sale value to determine whether his supply exceeds the de minimis threshold of $5,000.

Where there is a contingent discount or delayed reduction in price, the pre-discount GST-exclusive value of the prescribed goods shown on the tax invoice should be used to determine whether the supply exceeds the de minimis threshold of $5,000. 8.2.3 Your supply of prescribed goods to the GST-registered customer will be subject to customer accounting if the discounted sale value or the pre-discount value shown on the tax invoice exceeds $5,000.

A single purchase order with multiple deliveries

For a single purchase order with multiple deliveries, if the GST-registered supplier issues only one tax invoice for all the deliveries, he will use the total GST-exclusive value of the prescribed goods shown in the tax invoice to determine whether the supply exceeds the de minimis threshold of $5,000.

On the other hand, if his normal commercial practice is to issue one tax invoice for each delivery made, such that multiple tax invoices are issued in respect of a single large purchase order, he should determine if customer accounting applies based on the GST-exclusive value on each of the invoices.  However, if he would like to apply customer accounting to all the invoices even though some/all will not exceed $5,000 individually, he can do so provided the GST-exclusive value of the prescribed goods in the single purchase order exceeds $5,000; and both his GST-registered customer and he agree for customer accounting to apply in this manner.

Combined sales of prescribed and non-prescribed goods

When a GST-registered supplier makes a sale consisting of both prescribed and non-prescribed goods to a GST-registered customer, he needs to determine whether the total GST-exclusive sale value of all the prescribed goods sold (whether or not they are of the same type/nature) exceeds $5,000.  The sale value of non-prescribed goods should not be included in this computation.  Upon exceeding the threshold, the GST-registered supplier should apply customer accounting to the sale of the prescribed goods only and not to the non-prescribed goods.

Returned goods

If as a result of the returned goods, the GST-exclusive sale value of the prescribed goods is reduced to $5,000 or below, the GST-registered supplier should issue a credit note to cancel the original sale made under customer accounting and re-issue a tax invoice showing the revised sale value with GST charged (i.e., without applying customer accounting).  He should also collect from his customer the GST chargeable on the revised sale value.

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Income Tax & GST – Chinese New Year Gifts to Employees

First of all, we wish all our readers a happy and prosperous Year of Rooster.

During this festive season, some employers have the practice of gifting red packets to their employees.  It is important for them to be aware of the related Singapore income tax and GST rules:

  • For Singapore income tax purposes, any gifts not exceeding $200 is considered not substantial in value and thus, the gifts to the employees do not constitute a taxable benefit.  However, if the gift exceeds this exemption threshold, the full value of the gifts is a taxable benefit to the employee.
  • For Singapore GST purposes, the Comptroller allows the employers to claim input tax incurred on the gifts for Chinese New Year to their employees (not to the employees’ family members).   On the other hand, the the cost of each gift exceeds $200, the employers will also be required to account for output tax.  Of course, the employers need not account for any output tax if they do not make any input tax claims.



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Difference between Income Tax & GST Application

Many times in our education to our clients on income tax and Goods & Services Tax (“GST“), we stress that these two branches of tax law are different and it is absolutely risky to apply income tax concept to solve a GST problem or vice versa.

For instance, if a foreign company is treated as a resident company in Singapore because it is proven to the IRAS’ satisfaction that the control and management of its business is exercised in Singapore, does it mean that it is also belonging in Singapore for GST purposes?

In our opinion, the concept of tax residence for income tax purposes is different from the concept of belonging in a country for GST purposes.  The place where a person is belonging depends on where it has its business establishment or fixed establishment, or if it has no such establishment, where its usual place of residence.  This is provided for under Section 15 of the GST Act.   So, if a foreign company has indeed such establishment only in Singapore, it is arguable that it should be seen as belonging in Singapore.  On the other hand, if it has such establishments in Singapore and other parts of the world, then it would only be treated as belonging in Singapore if the establishment in Singapore most directly used the service.

Once again, it is a risky proposition to apply any income tax concepts to solve a GST problem and vice versa.

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Singapore GST – Fraudulent GST Refund Claims Uncovered

It was reported on IRAS’ Website on 19 February 2016 that Tan Wan Wen (Tan) was sentenced to 8 weeks in jail, ordered to pay a penalty of $55,000 (3X the amount of GST refunds that were fraudulently claimed using  multiple shell businesses.

IRAS’ audit revealed that Tan’s businesses were registered under different individuals’ names.  What happened was that Tan made use of the names of several acquaintances and her husband to set up various shell businesses with the intention of defrauding the Government of the GST refund.  These businesses are Alco Industrial Supplies Pte Ltd, Eltronic Marketing Pte Ltd, Newmart Trading & Services and Raco Industrial Supply.

IRAS’ investigation officers also uncovered that fictitious or “paper” transactions were carried out between these businesses. Tan then assisted these shell businesses to make false declarations on their respective GST returns in 2008.  Through these shell businesses, she had fraudulently claimed a total amount of $18,000 in GST refund.  Tan pleaded guilty to three charges while the remaining four charges were taken into consideration for the purpose of sentencing.  She was sentenced to 8 weeks in jail and ordered to pay a penalty of $55,000, 3X times the amount of GST refund fraudulently claimed under Section 62 of the GST Act.

What does this mean to you?

Under Section 62 of the GST Act, offenders who claim GST input tax on fictitious purchases or understate output tax on sales  can face a penalty of up to 3X the amount of GST input tax claimed,  a fine not exceeding $10,000, and/or imprisonment of up to seven years.

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