Singapore has long been known as a global business hub, and its transparent and business-friendly tax regime is a significant part of its appeal. One of the key components of this tax system is the Goods and Services Tax (GST). If you’re a business owner in Singapore, understanding GST is crucial, as it can impact your operations and financial management. In this blog, we’ll delve into the essentials of GST in Singapore, providing you with a comprehensive guide to help you navigate this aspect of your business.
What is GST?
GST, which stands for Goods and Services Tax, is a consumption tax in Singapore. It is levied on the supply of goods and services within the country. GST is a value-added tax, which means that it is paid by consumers when they purchase goods and services, but businesses are responsible for collecting and remitting it to the government.
GST Registration Requirements
In Singapore, the process of Goods and Services Tax (GST) registration is subject to specific criteria and thresholds that businesses must adhere to. Understanding these requirements is pivotal for business owners to ensure proper compliance with the law. Let’s explore the GST registration prerequisites and exemptions in a more simplified manner:
Mandatory Registration Threshold
For Singaporean companies, the GST registration mandate comes into play when:
- Exceeding the Threshold: If your taxable turnover, which is essentially the revenue subject to GST, surpasses S$1 million over the past 12 months, GST registration becomes obligatory.
- Future Projections: Companies that anticipate their taxable turnover to exceed S$1 million within the next 12 months are also required to register for GST.
It’s essential to conduct regular assessments at the end of each quarter to monitor your taxable turnover. When the threshold is crossed:
- Companies that have exceeded S$1 million in taxable turnover over the last 12 months must register for GST within 30 days following the end of the last quarter when this occurred.
- Companies that expect to exceed S$1 million in taxable turnover within the upcoming 12 months must initiate the GST registration process within 30 days of making this determination.
While businesses with an annual taxable turnover below S$1 million are not obligated to register for GST, they have the option to do so voluntarily if it aligns with their business strategies.
- The company director has prior experience in managing other GST-registered businesses.
- The individual responsible for preparing the company’s GST returns is an Accredited Tax Adviser (ATA) or Accredited Tax Practitioner (ATP).
- The person handling GST returns has completed the e-learning courses mentioned above within the last two years.
It’s important to note that the Inland Revenue Authority of Singapore (IRAS) may impose additional conditions for GST registration and compliance and retains the right to cancel a company’s GST registration if any of these conditions are not met.
Exemption From Registration
Certain companies, which would typically be subject to mandatory GST registration, have the opportunity to apply for an exemption from registration. This exemption can be granted if they meet the following criteria:
- Zero-Rated Supplies: At least 90% of the company’s total revenue must come from supplies that are not subject to GST, commonly referred to as “Zero-rated” supplies.
- Negative Net GST Balance: The net balance of GST collected for supplies, as opposed to GST paid for purchases, must be negative. In simpler terms, the company should have been eligible for a GST refund from IRAS as a GST-registered business.
It’s important to recognize that exempt companies, similar to non-registered GST companies, cannot claim GST incurred on business purchases. Therefore, if a business anticipates receiving a credit for the GST it has paid, GST registration becomes necessary.
Understanding and adhering to these GST registration requirements and exemptions is crucial for businesses in Singapore to ensure they are in compliance with tax regulations while making informed decisions about their GST registration status.
The current standard GST rate in Singapore is 8%, but it is set for an increase in Jan 2024 to 9%. Also, there are certain goods and services that are either exempt or subject to a different rate. It’s essential to be aware of these exceptions and rates to ensure accurate compliance.
GST Filing and Payment
As a registered GST entity, your responsibilities include the submission of a GST return, known as GST F5, to the tax authorities in accordance with your accounting cycle, typically on a quarterly basis. When completing your return, you will provide details of the total value of your local sales, exports, and purchases from other GST-registered entities, as well as the GST collected and GST claimed for the specific accounting period.
GST return submissions have transitioned to electronic filing. Once you have initiated the e-filing process for your GST F5, the subsequent GST return will be made available for electronic submission online by the end of each accounting period. You are permitted to e-file your GST F5 starting one day after the conclusion of the accounting period.
It is imperative to ensure that IRAS receives your return no later than one month following the conclusion of your prescribed accounting period. Even if there is no GST payable for that specific period, you are still required to submit a ‘nil’ return. Penalties may be imposed for late submission of the GST return, irrespective of whether the net GST amount declared is payable or refundable.
Furthermore, you are obligated to settle the net GST amount within one month after the conclusion of your prescribed accounting period. Delays in making the GST payment can result in penalties. For businesses eligible for GST refunds, these refunds are typically processed within 30 days from the date of receipt of the return.
In essence, meeting the deadlines for GST return submission and payment is essential for maintaining compliance and avoiding penalties. The efficient handling of GST responsibilities not only ensures adherence to tax regulations but also contributes to the smooth financial management of your business.
The Singaporean government offers various special schemes and exemptions to help businesses manage their GST obligations more efficiently. Understanding which scheme, if any, is right for your business can save you time and money.
1. Tourist Refund Scheme
Designed to aid tourists who make purchases from participating GST-registered retailers in Singapore. Tourists can claim a refund of the GST paid if they take the goods out of Singapore.
2. Cash Accounting Scheme
Tailored for small businesses with annual sales not exceeding SGD 1 million. It simplifies GST accounting by allowing businesses to pay GST only when they receive payments from customers.
3. Gross Margin Scheme
GST is levied solely on the gross margin of goods sold, reducing the GST burden on businesses.
4. Major Exporter Scheme (MES)
Geared towards major exporters with substantial import activities. It enhances cash flow by deferring the payment of GST on imports.
5. Hand-Carried Exports Scheme
Enables businesses to zero-rate the supply of goods to overseas customers when the goods are hand-carried out of Singapore via Changi International Airport.
6. Zero GST Warehouse Scheme
Allows businesses to convert their warehouses into zero-GST warehouses, reducing bureaucratic processes and exempting them from the GST procedure.
7. Discounted Sale Price Scheme
Permits the charging of 50% GST on second-hand or used vehicles, providing a cost-effective option for vehicle transactions.
8. Import GST Deferment Scheme (IGDS)
Allows businesses to defer GST payment on imports until their monthly GST returns are due rather than at the point of importation.
9. Other Industry-Specific Schemes
The Government has developed various GST schemes tailored to specific industries such as marine, logistics, and more, providing industry-specific support and advantages.
These GST-related schemes play a vital role in promoting economic growth and easing the tax burden on businesses in Singapore. By strategically choosing schemes that align with their business activities, companies can enhance cash flow, reduce administrative complexities, and boost their competitive edge in the marketplace. The availability of these schemes underscores the Singaporean Government’s commitment to creating a favourable environment for businesses to thrive and succeed.
Penalties and Audits
Failure to comply with GST regulations can result in penalties and interest charges. The Inland Revenue Authority of Singapore (IRAS) has the authority to audit businesses to ensure their GST compliance. Being prepared and maintaining accurate records is crucial to avoid any issues during an audit.
If you do not adhere to the filing deadline, IRAS may take the following enforcement measures:
- Issue an estimated Notice of Assessment, accompanied by a 5% penalty on the estimated tax due.
- Impose a penalty of $200 for late submission. An additional penalty of $200 is levied for each full month during which the GST F5/F8 return remains unfiled. The maximum penalty for each outstanding F5/F8 return is capped at $10,000. This late submission penalty is required to be settled alongside any GST payments that may be due.
- Summons the individuals responsible for the business’s management, including the sole proprietor, partner, and director, to appear in court.
Even if your GST-registered business had no activity during the accounting period, it is still obligatory to file a ‘Nil’ GST return. In the event that your business has ceased its operations, it is advisable to apply for the cancellation of your GST registration with the relevant authorities.
Seek Professional Advice
Navigating the intricacies of GST can be challenging, especially for small business owners. Seeking professional advice from a certified accounting and taxation consultant can help you ensure proper GST compliance and potentially uncover tax-saving opportunities.
GST in Singapore is an integral part of the country’s tax system, and as a business owner, understanding it is essential. From registration and rates to input tax credits and special schemes, staying informed and compliant can make a significant difference in your business’s financial health. Keep in mind that the GST landscape is subject to changes and updates, so staying current with regulations and seeking professional advice from an experienced corporate service provider when needed is crucial. By doing so, you can focus on growing your business and navigating Singapore’s vibrant economy with confidence.