Countdown to new Singapore GST rules

Low-value goods are defined by IRAS, the Singapore Tax Authority, as:

• Goods which at the point of sale are located outside of Singapore; and
• Are to be delivered to Singapore via air or post; and
• With a value not exceeding SGD $400.

The Inland Revenue Authority of Singapore (IRAS) has stated that regardless of the way the goods are bundled for shipment, the goods should be disaggregated and valued separately as separate items even if the combined value of the consignment were to be greater than SGD $400.  The SGD $400 value applies individually to each item of goods supplied. However, where multiple low value goods are shipped as a single consignment with a total value SGD $400 CIF value, there is a strong risk of double taxation as Import GST will also be levied by Customs.

• Goods that are subject to customs duty e.g certain alcohol and tobacco products
• Goods exempt from GST
• Goods with a value exceeding SGD $400
• B2B sales (i.e. sold to a GST-registered business customer in Singapore). 

Singapore GST-registered business customers will not be charged GST at the point of sale and will instead self-assess for Singapore GST under the reverse charge mechanism.

Foreign suppliers of low value goods are required to register for GST in Singapore where they pass both of the following threshold tests:

Where an overseas seller’s annual global turnover exceeds SGD $1m and the annual value of B2C low value goods into Singapore exceeds SGD $1m, then GST registration is mandatory in Singapore.

If a non-resident business is selling low value goods to consumers in Singapore and meets the global turnover and Singapore revenue tests, it will be required to register for GST – obtaining a “Overseas Vendor Registration” (OVR).  This is the same simplified GST registration that is already used by foreign B2C digital service providers. Simplified GST returns will also need to be submitted.

Where a foreign business reasonably expects the value of its global turnover and B2C supplies of low value goods to Singapore to exceed SGD $1 million and SDG $100,000 respectively for the next 12 months, it will need to notify IRAS i.e. submit an application for GST OVR within 30 days from the date of the forecast. However, ahead of the introduction of these new rules, if a business reasonably expects to meet these thresholds on or before 23 September 2022, it must notify IRAS by October 1, 2022 and will therefore be GST registered ready for the new rules on 1 January 2023.

Where a foreign business’ global turnover and B2C supplies of low value goods into Singapore exceed the thresholds for the calendar year, it must notify IRAS i.e. submit an application for GST OVR within 30 days of the end of that relevant calendar year.

Businesses show be aware that the rate of GST in Singapore is increasing to 8% from January 1, 2023 and then to 9% from January 1, 2024.

The GST OVR is a simplified “pay-only regime” which features simplified GST reporting and documentation requirements compared with a full traditional Singapore GST registration. This includes:

• Charge GST at the point of sale on the invoice where low value goods will be delivered to a Singapore ship-to address.
• No requirement for an overseas business to appoint a local agent to handle tax matters
• No requirement to provide security deposit (unless registration on a voluntary basis)
• File simplified GST returns with only certain relevant fields to complete
• Simplified returns are filed on a quarterly basis with filing and payment due within 1 month from the end of each accounting period
• However, input tax claims (i.e. claims to recover GST incurred on costs) are not allowed under the simplified regime 
• Where an overseas business is in a net refundable position, the net GST refundable will be retained as credit for offset against GST payable in future periods
• If errors are made in the GST returns, the overseas business should correct them in its next GST return
• Where significant errors are made, overseas vendor formally write to IRAS to request for an adjustment to be made 
• Bad debt relief is available subject to completing the self-review checklist with any GST refundable held as credit
• Requirement to maintain proper business and accounting records for at least 5 years
• Requirement to make available upon request supporting documents, including sales listings, invoices issued, evidence of payment and customer information (i.e. GST registration number for B2B sales) to substantiate the GST collected from all supplies made to customers in Singapore

Foreign sellers will also need to pass their relevant GST information to their logistics service providers and/or freight and customs agents, to ensure that this information is declared to Singapore Customs to ensure that Import GST will not be imposed on goods where GST was already collected at point of sale. This include:

• Confirmation GST has been paid for each item (including providing a copy of the invoice)
• GST registration number of the overseas vendor

Singapore is also introducing deemed marketplace GST liability rules for low value goods. Electronic marketplace operators are regarded as the supplier of the imported low value goods for GST purposes where any of the following conditions are met: 

1. The marketplace authorises the charge to the customer (communicates the liability to pay to the customer or influences whether or at what time the customer pays)
2. The marketplace authorises the delivery of supply to the customer (delivers an item itself or sends approval to commence delivery)
3. The marketplace sets the terms and conditions under which the supply is made (influences pricing, specifies payment/delivery methods, or provides customer support or owns customer data)
4. Documentation issued to customer identifies the supply as made by the marketplace (receipts, invoices, or information displayed on marketplace’s website)
5. The marketplace and merchant contractually agree that the marketplace is responsible for GST obligations

Based on the above requirements, with effect January 1, 2023, most electronic marketplace operators will be regarded as the supplier for GST purposes, except platforms that merely provide listing services. If regarded as the supplier, an overseas marketplace operator, in calculating its global turnover and its value of low value goods to Singapore when determining its GST registration liability will be required to include both the value of supplies of low value goods made by local and overseas suppliers to non-GST registered customers/B2C via its marketplace and its own supplies it makes direct. Once the marketplace is registered for GST, it must charge and account for GST on all relevant supplies instead of the suppliers, regardless of whether these suppliers are GST-registered or not.

Historically the customs border could provide some protection from taxes for overseas sellers, as the liability to pay tax at the border could be passed over to the customer or payment facilitated by a freight agent or courier on their behalf, or for imported low value goods could be imported free of GST. By removing GST exemptions on imported low value goods and switching to GST at the point of sale charged and collected by the non-resident seller, Singapore and Malaysia (which is introducing sales tax on low value goods) are following similar rules in the UK, Australia, New Zealand, Switzerland, Norway and the European Union’s Import One Stop Shop streamlined registration and return. 

Please contact us to discuss how Avalara can assist you with GST compliance in Singapore or Malaysia  - including registration and return preparation and submission.