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.

If you have any questions regarding the above, contact us at support@whm-consulting.com.

Income Tax – Public Consultation on Draft Income Tax (Amendment) Bill 2017


The Ministry of Finance has published for public consultation the Draft Income Tax (Amendment) Bill 2017 to incorporate 34 proposed legislative amendments, including:

1.   Eight Budget 2017 changes, including

  •  Enhancement and extension of the Corporate Income Tax (CIT) rebate for Year of Assessment (YA) 2017 and YA 2018.
  • Introduction of the Personal Income Tax rebate of 20% (capped at S$500) for YA 2017.
  • Liberalisation of the tax deduction for payments under Cost Sharing Agreements (CSAs) for Research and Development (R&D) projects.

2.  Amendment to introduce mandatory Transfer Pricing Documentation Requirement 

To limit compliance burden for smaller businesses, the mandatory TPD requirement will only apply to businesses with a turnover exceeding $10m and significantly related party transactions. The majority of companies will not be affected, as this change will only be relevant to fewer than 5% of all companies, many of which have already been maintaining TPD.

3. 25 Other non-budget changes including

  • Amendments relating to third-party voluntary contributions to the Medisave accounts of private sector employees and self-employed persons (SEPs).
  • Changes to enable the Minister for Finance to implement Singapore’s obligations under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).

The consultation exercise will end on 10 July 2017.

If you have any questions regarding the above, contact us at support@whm-consulting.com.

Singapore To Sign The Multilateral Convention To Implement Tax Treaty Related Measures To Prevent BEPS


On 7 June 2017, Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”), with over 60 other jurisdictions.

The signing of this MLI represents Singapore’s commitment to upholding the principles behind BEPS, i.e.  profits should be attributable to the jurisdictions where the substantial economic activities giving rise to such profits are conducted.

The Finance Minister, Mr. Heng Swee Keat said

“Singapore strongly supports the principle that profits should be attributable to the jurisdiction where substantive economic activities generating the profits are based.  Signing the Multilateral Instrument allows Singapore to swiftly update its wide network of Avoidance of Double Taxation Agreements to internationally agreed standards. Singapore’s signing of the Multilateral Instrument reaffirms Singapore’s commitment and support to the BEPS Project.”

What is the impact on Singapore’s DTA network when Singapore signs the MLI?

The MLI provides flexibility for a jurisdiction to

  • determine which of its DTAs it would like to amend using the MLI; and
  • indicate which provisions in the MLI it would like to adopt and how such provisions should be adopted.

For example, if both Singapore and Jurisdiction A have signed the MLI, the bilateral DTA between Singapore and Jurisdiction A will be amended only if both Singapore and Jurisdiction A indicate that they would like to amend their bilateral DTA using the MLI.

In the MLI context, such a bilateral DTA is referred to as a “Covered Tax Agreement (CTA)”.  A provision in the DTA between Singapore and Jurisdiction A (i.e. the CTA) will be amended by an MLI provision only if both Singapore and Jurisdiction A have taken the same position regarding that provision in the MLI.

At the point of signing the MLI in June 2017, Singapore has provided a provisional list of the DTAs that it would like to amend using the MLI, as well as its provisional positions on the MLI provisions. This provisional list may be amended and will only be confirmed upon ratification of the MLI.  Singapore has included 68 of its 82 comprehensive DTAs after considering various factors, such as our DTA partners’ commitment to the BEPS Project. These DTAs will be amended by the MLI only if the respective DTA partners also sign the MLI and have included the respective DTAs under the scope of the MLI.

How did Singapore determine its positions on the MLI?

The MLI allows jurisdictions to swiftly implement the tax treaty related BEPS recommendations, which include both mandatory provisions (i.e. the minimum standards under the BEPS Project) as well as non-mandatory provisions.

Singapore will be adopting these mandatory provisions in the MLI,

(i) Article 6 (Purpose of a covered tax agreement) – To include a statement of intent in the preamble of the covered tax agreement that the DTA is to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance

(ii) Article 7 (Preventing treaty abuse) – To include a general anti-abuse rule in the covered tax agreement, commonly known as the Principal Purpose Test (PPT).

(iii) Article 16 (Mutual Agreement Procedure) – To include a mechanism to allow a Singapore resident taxpayer to seek assistance from IRAS when the taxpayer encounters taxation in a DTA jurisdiction that is not in accordance with the intended application of the DTA.

Singapore will also be adopting a number of non-mandatory provisions in the MLI, which it believes will be beneficial for its taxpayers.  One such example is the adoption of the mandatory binding arbitration provision in our DTAs. This provision will provide an alternative dispute resolution mechanism if the competent authorities are unable to reach agreement or are unable to do so in a timely manner.  The mandatory binding arbitration provision will be included in our DTAs if the respective DTA partners also choose to adopt the provision.

If you have any questions, contact us at support@whm-consulting.com

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.

If you have any questions, contact us at support@whm-consulting.com

Income Tax – Robotic Ice-Cream Machine Dealer Convicted of False PIC Claim


It was reported in IRAS’ website on 27 April 2017 that
Robofusion Asia Pte Ltd (“Robofusion”) has been convicted of giving false information in the Productivity and Innovation Credit (“PIC“) cash payout application form.  Its director, Yong Tai Kok (“Yong“) has also been convicted of his role in assisting Robofusion in making the false PIC Claim.

IRAS’ investigation

IRAS’ Investigations revealed that Yong obtained the consent of two other people who were not employees of Robofusion, to use their names in Robofusion’s PIC cash payout application form dated 23 May 2013.  Robofusion made CPF contributions to their Central Provident Fund accounts in order to represent them as Robofusion’s local employees when in fact they were not.

Robofusion’s PIC cash payout application was for the purchase of “Robofusion Generation 4 Ice Cream Kiosk” costing $93,000 on 28 Feb 2013 and “Software License and Implementation for Cashless Payment System and Kiosk Payment Integration” costing $14,980 on 29 Apr 2013. The amount of PIC cash payout which was wrongfully obtained was $60,000.

Eventually … 

The court ordered Robofusion to pay a penalty of $60,000 for the PIC cash payout that it was not entitled to.

Yong was convicted of intentionally aiding Robofusion to, without reasonable excuse, give false information to the Comptroller of Income Tax to obtain a PIC cash payout which the company was not entitled to.  The court ordered Yong to pay a penalty of $120,000, which is twice the amount of PIC cash payout that was wrongfully claimed and a fine of $4,000.

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