Singapore's GST imposed on overseas vendors

Singapore’s GST will be imposed on foreign vendors in a new formula that imposes GST on imported services.

However, the new goods and services tax formula on imported services will take effect in 2020.

It was announced in the Budget 2018 by the Minister for Finance of Singapore, Mr Heng Swee Keat last week.

“The Budget 2018, in summary, was all about increasing government revenue via higher taxes in order to pay for rising spending needs.

“On a brighter side, the budget reflects the Singaporean government’s efforts to address inequality in Singapore.

“As well as to improve quality of life,” said Lawrence Chai Managing Director of 3E Accounting.

Introduction of GST on Imported Services
The new tax system will impact two types of services:

1. business-to-business (B2B), such as marketing services, accounting services and IT services; and

2. business-to-consumer (B2C), including video and music streaming services, apps, and online subscription fees.

However, the GST does not affect e-commerce for goods such as online shopping.

In addition, overseas suppliers, which have establishments in Singapore, do not need to pay the new tax.

B2C imported services will pay the tax as part of a new overseas vendor registration model.

Whereas B2B imported services will be levied through a reverse charge mechanism.

Reverse charges and overseas vendor registration are common in countries that implement GST on imported services.

Some of these countries are Australia, Japan, South Korea and New Zealand.

The reverse charge only applies to businesses that:

(i) make exempt supplies, or (ii) do not make any taxable supplies.

On the other hand, the taxation of B2C imported services will take effect via an Overseas Vendor Registration (OVR) model.

Who will have to register to IRAS for GST?

They are overseas suppliers and electronic marketplace operators, which make significant supplies of digital services to local consumers.