Understanding Singapore's new GST rules for non-resident companies
As of 1 January 2023, Singapore has introduced an increase in the tax on goods and services (GST). This change breaks a 15-year cycle of consistent GST rates in Singapore. The confirmed increase will follow a phased approach. The first stage includes an increase from 7% to 8% on 1 January 2023. After that, an expected increase from 8% to 9% from 1 January 2024.
However, apart from the standard rate increase, Singapore has introduced new rules concerning the scope for non-established registration for B2C supplies. Here’s what businesses need to know to ensure consistent compliance whilst navigating the most recent changes to VAT in Singapore.
Under Singapore’s previous Overseas Vendor Registration (OVR) regime, all non-resident suppliers of B2C digital services with a global turnover exceeding S$1 million were subject to GST.
However, as of 1 January 2023, Singapore added two new elements to the GST-registration scope non-resident suppliers:
Non-digital services
The import of low-value goods
This includes B2C services such as professional, consultancy, advisory or educational services supplied from outside of Singapore. Essentially, all B2C supplies of imported services—digital or non-digital—that can be provided and received remotely will be subject to GST.
What constitutes low-value goods?
The import of low-value goods, which is now included in the GST registration scope for non-resident companies in Singapore, must meet the following criteria:
They are classified as non-dutiable goods.
Are not considered GST-exempt
Suppliers are non-resident entities
The value of goods and services exceeds the S$400 GST import relief threshold.
In addition, goods bought from overseas during travel will also be subject to GST as of January 2023. However, for trips longer than 48 hours, travelers will receive a relief up to a $500 threshold and be taxed for the amount thereafter.
Oman: Rebooting e-Invoicing with Omantel
Throughout the automotive industry, VAT reclaim is essential to minimizing business costs and injecting beneficial cash flow into your business to elevate your business finance. However, despite best efforts, the reclaim process can come with some bumps in the road that are hard to spot if you don’t know what to look out for.
Common speed bumps in the VAT recovery process
It’s important to note that most businesses aren’t willingly leaving money on the table. The VAT reclaim process is rife with challenges, and despite best efforts, many organizations struggle to maximize their VAT recovery yield – here’s why:
Documentation Requirements: VAT refund claims are often interrupted or rejected due to insufficient or inaccurate documentation. This includes incomplete or error-prone receipts, invoices, and supporting records.
Missed recovery opportunities: To maximize your VAT recovery yield, teams must understand which costs are eligible for recovery. Many refundable expenses are often not visible from an expense management perspective, making them near impossible to identify.
Incorrect VAT treatment and classification: Since no standardized VAT recovery process exists, many claims are rejected due to not fully understanding or adhering to local legislation or Tax Office requirements. It is critical to understand the different types of expenses and classify them according to the correct VAT treatment per country-specific VAT rules and requirements.
Amendments to legislation: To successfully recover your VAT, your organization must be updated with the latest case law and legislation regarding VAT reclaim for your specific industry and expenses. However, VAT regulations are prone to change, and frequent updates and amendments aim to simplify and improve VAT legislation. This means that your business must keep up with local and international changes to stay compliant and eligible for VAT recovery.
Fortunately, common roadblocks in the reclaim process don’t have to drain your resources or stall the reclaim process. Here’s what your business needs to know about maximizing savings in the automotive industry without compromising time, effort, or money.
Who’s affected by the new GST registration scope?
These new changes make non-registered vendors liable for GST registration on two separate accounts:
Retrospective basis: Non-resident entities are required to register if their global turnover and value of B2C supplies of Low-Value Goods and remote services exceed S$1 million and S$100,000, respectively, at the end of any calendar year. If the supplier is below this threshold and can prove it with substantial documentation, they are not required to register for GST.
Prospective basis: In the event that the value of global turnover and B2C supplies of LVG and remote services is expected to exceed S$1 million and S$SGD 100,000, respectively, for the next 12 months, the non-resident supplier may register under a simplified pay-only regime to ease the compliance burden.
Consistent compliance with VAT IT
With these new changes, affected overseas vendors must assess their processes and systems to ensure that they’re registered and compliant with the new rules regarding the supply of non-digital services and the import of low-value goods.
However, value-added tax compliance can feel increasingly burdensome considering the evolving tax administration. Instead, stay ahead of the compliance curve and conquer all the latest VAT and GST changes with a team of experts by your side. Our fully automated end-to-end, one-stop shop for global VAT compliance takes care of your VAT compliance so you can focus on growing your business.
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