Written by Team Farallon
In Singapore, Goods and Services Tax (GST) is a fundamental aspect of the business taxation system, mirroring the concept of Value-Added Tax (VAT) prevalent in many other countries. GST is a broad-based consumption tax levied on the import of goods, as well as nearly all supplies of goods and services in Singapore. The current rate is 9%, though this is subject to change based on government policy.
The Goods and Services Tax (GST) in Singapore is a value-added tax levied on the supply of goods and services within the country and on the import of goods, and applies to most goods and services, making it a broad-based, indirect form of taxation. Businesses with a taxable turnover exceeding SGD 1 million are required to register for GST and charge it on their goods and services. However, registration is optional for businesses with lower turnover. The implementation of GST in Singapore follows the principles of a consumption tax, where the final burden of the tax falls on the end consumer. The system allows GST-registered businesses to claim credits for the GST paid on their business inputs, reducing the cascading effect of taxes and ensuring efficiency in the tax system.
In Singapore, eligibility for Goods and Services Tax (GST) registration is primarily determined based on the taxable turnover of a business. There are two types of GST registration – mandatory and voluntary.
A business must register for GST if its taxable turnover exceeds SGD 1 million. There are two ways this threshold can be met:
If the total value of taxable supplies (excluding exempt supplies like sale and lease of residential properties and financial services) made in Singapore in any past 12 months exceeds SGD 1 million, the business is required to register for GST.
If at any point, there is a reasonable expectation that the total value of taxable supplies in the next 12 months will exceed SGD 1 million, based on factors like business plans or contracts secured, the business is also required to register.
Businesses with a taxable turnover that does not exceed SGD 1 million can choose to register for GST voluntarily. This is often done to reclaim GST incurred on business expenses. However, voluntarily registered businesses must comply with all GST requirements, such as filing regular GST returns and keeping proper accounting records. They also need to stay registered for at least two years.
Both local and foreign businesses can register for GST in Singapore, but foreign businesses may have additional criteria to meet.
Below are some of the reasons why you should consider GST registration for your business:
For businesses exceeding the taxable turnover threshold of SGD 1 million, GST registration is mandatory. This compliance is not just a legal obligation but also a demonstration of the business’s adherence to the financial norms set by the Inland Revenue Authority of Singapore (IRAS).
Being GST-registered often enhances a business’s credibility. Clients and suppliers perceive GST-registered companies as having a significant turnover, which can be an indicator of financial robustness and reliability.
Registered businesses can claim GST incurred on their business expenses, potentially leading to considerable cost savings. This input tax credit mechanism ensures that businesses only bear the GST cost on their value addition, not on the entire supply chain.
Registration allows businesses to charge GST on their goods and services. While this might seem like an added cost to customers, it’s a standard practice in Singapore, and not doing so could imply that the business is smaller in scale compared to competitors.
For businesses involved in international trade, being GST-registered can be particularly beneficial. It allows for claiming GST refunds on exports and international services, thereby reducing the cost burden and enhancing competitive pricing in global markets.
Registering for Goods and Services Tax (GST) in Singapore, while beneficial in many ways, also comes with certain drawbacks, particularly for businesses. We have outlined some of these drawbacks below:
GST-registered businesses are required to file regular GST returns, typically on a quarterly basis. This involves maintaining detailed records of sales, purchases, GST collected, and GST paid. The need for meticulous bookkeeping and compliance with reporting requirements can be time-consuming and may necessitate additional administrative support or resources.
Complying with GST regulations may involve additional costs. This includes the expense of accounting software or systems capable of handling GST requirements, training staff to manage GST-related processes, and possibly hiring tax consultants or accountants for expert guidance.
For businesses catering primarily to end-consumers, the addition of GST to the price of goods and services can lead to higher prices for consumers. This could potentially affect sales, especially if consumers are price-sensitive. Businesses must balance the need to remain competitive with the requirement to charge GST.
The complexity of GST laws means that there is a risk of unintentional non-compliance. Errors in filing GST returns, incorrect GST claims, or failing to adhere to the regulations can result in penalties and fines, adding a layer of risk to business operations.
The GST registration process in Singapore is straightforward but requires attention to detail to ensure compliance with the Inland Revenue Authority of Singapore (IRAS) guidelines. Here’s an overview of the process:
Before registering, gather all necessary information and documents. This includes business contact details, financial statements, details of business activities, and the Unique Entity Number (UEN) for businesses registered in Singapore.
GST registration is done online through the myTax Portal, managed by IRAS. To access the portal, you’ll need either a CorpPass (for local businesses) or a SingPass (for sole proprietors).
Note that businesses that do not have access to the myTax portal can submit a paper-based application by downloading the form online, completing it by hand and sending it with supporting documents to 55 Newton Road, Revenue House, Singapore 307987.
Fill out the online GST registration form (GST F1). This form requires detailed business information, including expected revenue, business activities, and financial year-end.
In some cases, IRAS may request additional documentation to support your application. This could include past sales records or future contracts to substantiate your taxable turnover figures.
Review your application thoroughly to ensure accuracy, then submit it through the myTax Portal.
IRAS typically processes GST registration applications within two to four weeks. During this period, IRAS might contact you for further information or clarification.
Once your application is approved, you’ll receive a Notification of GST Registration letter. This letter includes important details such as your GST registration number, the effective date of registration, and your filing frequency.
Once a business in Singapore is registered for Goods and Services Tax (GST), it must adhere to certain post-registration compliance requirements to ensure it remains in good standing with the Inland Revenue Authority of Singapore (IRAS).
Firstly, GST-registered businesses are required to charge GST on their taxable supplies at the prevailing rate which is 9%. This GST collected from customers is known as output tax. Businesses need to accurately include GST in their prices and reflect it on invoices and receipts.
Secondly, these businesses must file GST returns regularly, typically on a quarterly basis. The return must declare the output tax collected and the input tax, which is the GST paid on business purchases and expenses. The net GST (output tax minus input tax) is then remitted to IRAS. It’s crucial to file these returns on time to avoid penalties for late submissions.
Additionally, maintaining proper records is a key aspect of compliance. Businesses must keep detailed accounts of all transactions affecting their GST liability for at least five years. These records should be readily available for review in case of audits or inspections by IRAS.
Finally, businesses must stay informed about any changes in GST regulations and ensure their practices are updated accordingly. This includes understanding and applying any changes in the GST rate, exemptions, or reporting procedures.
Adhering to these compliance requirements is vital for businesses to avoid penalties, maintain their reputation, and ensure smooth operations. Regularly reviewing and auditing GST-related practices can help in identifying and rectifying any discrepancies early on.
De-registration from Goods and Services Tax (GST) in Singapore is a process that businesses may undertake when they are no longer liable to be GST-registered. This can occur under certain circumstances:
After de-registration, the business must still keep all its business and accounting records for at least five years in case IRAS requires them for any future audits or reviews.
De-registering from GST relieves the business from the responsibility of charging and remitting GST. However, it also means the business can no longer claim input tax credits. It’s important for businesses to carefully consider the implications of de-registration and to ensure that they continue to comply with all necessary legal and tax requirements post de-registration.
Seeking assistance and resources for GST registration and related issues is essential for businesses in Singapore, especially for those unfamiliar with the intricacies of the tax system. Here are some avenues for assistance and valuable resources:
IRAS is the primary resource for all GST-related information. Their website provides comprehensive guides, FAQs, and e-tax guides on various aspects of GST. They also offer e-learning courses for businesses to understand the basics of GST.
Professional tax consultants and accountants who specialize in Singapore tax law can be invaluable, particularly for complex businesses or those with unique tax situations. They can provide tailored advice, assist with the registration process, and help with ongoing compliance and filing obligations.
For legal interpretations of GST laws and how they apply to specific business scenarios, speak to a lawyer specializing in tax law who can provide the necessary guidance.
Joining these organizations can be beneficial as they frequently provide their members with resources, updates on tax policies, and networking opportunities for sharing best practices.
Keep an eye on government initiatives or support schemes that may offer assistance or subsidies related to GST compliance.
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