Goods and Services Tax (GST) is a broad tax levied on the consumption of most goods and services that are sold in Singapore. Many countries have a similar, or even identical, tax as Singapore’s GST, although it may be known as a Value-Added Tax (VAT) in some countries. The Inland Revenue Authority of Singapore (IRAS) governs the application of GST and requires all GST registered businesses to file GST returns with them.

GST is only levied on goods and services that are sold within Singapore. This includes imported goods. However, exported supplies and services provided overseas do not attract GST.

The Rate of GST

The current GST rate (in 2023) is 8%. This is being increased to 9% from January 2024.

In simple terms this means if the cost of a product is $100 then the consumer would actually pay $108 including GST.

What Goods and Services GST Applies to

GST applies to most goods and services sold in Singapore, however there are some exemptions.

The exemptions include most financial services, the sale and lease of residential property, and the importation and local supply of investment-orientated precious metals.

How GST is Charged and Remitted

The business selling goods or services is responsible for both the collection of GST from customers and remittance of the GST to IRAS.

GST registered businesses are required to track their sales and the amount of GST they collect through their regular record keeping. This information is then reported to IRAS through the lodgement of a GST return. GST returns are lodged with IRAS on either a monthly or quarterly basis.

The GST that a business collects is known as output tax.

Conversely, the GST that a business pays in the course of making business purchases is known as input tax.

Lodgement of a GST Return

When a GST return is lodged, the business reports the total output tax collected and claims a credit for all the input tax that they have paid. The net amount of GST that the business pays is the total amount of GST that the business must remit to IRAS.

In the event that the business pays more input tax than they collect in output taxes, IRAS will owe the business a refund.

Businesses who fail to lodge their GST return on time are subject to a 5% late lodgement penalty. IRAS will also issue a demand notice for the outstanding payment. If the company fails to pay after 60 days from the date of their demand notice, future penalties of 2% each month may be applied. The maximum penalty for late GST payments is capped at 55%.

Evasion of tax payments can result in fines and imprisonment.

Who Needs to Register for GST

All businesses with an annual turnover in excess of SG$1million are required to register for GST. Any business with a lower turnover can voluntarily register.

This turnover threshold only applies to businesses who are not GST exempt. Exempt businesses are businesses that deal with goods or services that are exempt from GST. This includes businesses that provide financial services, sell or lease residential property, or import and supply investment-orientated precious metals. To be given a registration exemption from IRAS, at least 90% of the company’s total revenue must be GST exempt and the net balance of GST collected must be negative (otherwise resulting in a refund).

Once a business is registered for GST they are required to remain registered for a minimum of two years.

If a company decides to voluntarily register for GST the company director(s) must complete e-Learning courses in “Registering for GST” and “Overview of GST”. They are exempt from needing to complete these courses if they have already completed these courses within the past two years, or they have experience managing another GST registered business, or have their GST returns prepared by an individual who is an Accredited Tax Adviser (ATA) or Accredited Tax Practitioner (ATP).

IRAS can also impose additional conditions for GST registration and compliance. When a company fails to meet these requirements, IRAS may cancel the company’s GST registration.

How to Register for GST

A company can register for GST online through their myTax Portal or they can post a paper application to IRAS. Alternatively, they can engage a designated filing agent to submit the application on their behalf.

The company cannot charge GST until they have received approval from IRAS.

Once registration is approved, IRAS will send a letter that includes the company’s GST registration number and the effective date of GST registration.

The effective date of GST registration is the date that the business must commence charging and collecting GST from.

What Happens When You Fail to Register for GST on Time

To understand what happens if you fail to register for GST on time we present this real life case study. Names and specific identification have been hidden or changed for anonymity.

The case:

An Australian company incorporated a company in Singapore to act as the local contracting party for services to be provided in Singapore.

As an Australian company, they were familiar with the Australian approach to GST registration. This differs from the Singapore requirements in that, in Australia, GST registration can be backdated and it can be made on a voluntary basis without additional requirements.

The threshold for GST registration in Australia is AU$75,000 and only applies to GST taxable goods and services. In both countries GST registration is considered voluntary registration when the annual turnover is below the relevant threshold.

Unlike Australian registration, voluntary registration in Singapore needs to be approved. In some cases, approval for voluntary registration needs to be accompanied by a bank guarantee for future payments of GST to IRAS. 

The Singapore company, in our case, proceeded to provide services with GST included in the price. However, they did this without formally registering for GST in Singapore.

In Singapore this is regarded as a severe contravention of the GST laws. This is because GST registration must be approved and the commencement date confirmed, prior to the business charging GST.

The company attempted to backdate the registration, which is not permitted in Singapore.

IRAS consequently imposed fines and potential action against the directors.

Summary of GST Registration Requirements in Singapore

In summary, it is important to be aware of the requirement to register for GST.

If you intend to register on a voluntary basis, understand that this is not automatic, and you need to meet the required conditions and be approved for registration. Otherwise, you must keep an eye on your quarterly turnover and register as soon as your projected turnover will hit the required turnover threshold.

GST applies to most goods and services sold in Singapore, with exemptions for financial services, residential property and importing of investment-oriented precious metals.

Once you receive your registration letter from IRAS, you can commence charging GST from the date indicated as your registration date.

Failure to follow the requirements for GST registration can result in fines and other penalties for all Directors of the Singapore company. 

A  Singapore Company is governed by the Singapore Companies Act. which is administered by the Accounting & Corporate Regulatory Authority (ACRA). There are 5 essentials that need to be covered when starting a company in Singapore. These five essentials include having a resident Director, a shareholder, a Secretary, a Singapore business address and at least $1 in capital.

To be a tax resident Singapore Company your company must be managed and controlled in Singapore. This generally means that meetings of the Board of Directors of the company must be undertaken in Singapore. 

Getting these company registration requirements right will assist in ensuring that your company is appropriately set up in Singapore.

1: The Requirement to have a Resident Director

Under the Singapore Company Act all Singapore companies are required to have at least one resident director. Without a resident director, a company will be contravening the Companies Act and risks being deregistered.

An individual is an ordinary resident of Singapore if they are a Singapore Citizen, a Singapore Permanent Resident, or an Employment Pass or EntrePass holder. This means that the individual is legally able to live and work in Singapore and have a residence in Singapore. 

It is important to note that individuals on working visas can only be appointed to the company which is sponsoring their permit.  

If you are planning to incorporate a company in Singapore but you do not have any resident individuals to be a director then you do have the option of nominating a resident director (usually a professional who is paid to fulfil the requirement).

2: The Requirement to have a Shareholder

All Singapore companies are required to have at least one shareholder. Shareholdings designate who owns the company, as well as who has the various rights, privileges, and responsibilities within the company.

Shareholders are required to participate in the Annual General Meeting and any Extraordinary General Meetings of the company, where the management decisions for the company are made.

There is no specific requirement that shareholders be Singapore residents. However, where a shareholder is not a Singapore resident, such shareholders will be subject to their local taxation laws on the receipt of income distributed to them from the Singapore company.

3: The Requirement for a Secretary

The Singapore Companies Act requires every company to appoint a Company Secretary. This Secretary is the individual who is responsible for ensuring that the company complies with the relevant legislations and regulations, as well as keeping Board Members informed of their legal responsibilities.

Your Secretary must be an individual who is a resident living in Singapore. As a position regulated by ACRA, they must also have the experience, academic, and professional qualifications necessary to fulfill their role. These individuals are usually lawyers, accountants or chartered secretaries.  

If you are a sole director of a company, you are not able to act as company secretary – you will need to appoint another person to act as Company Secretary. 

While not a legal requirement, it is recommended that you engage a corporate service provider to act as your Company Secretary.  Such professionals are known as Registered Filing Agents and are regulated and approved by ACRA to act in such a position. 

4: The Requirement for a Singapore Address

It is mandatory for all Singapore companies to have a local registered office in Singapore. This address is required from the point of incorporation.

The address must be a physical address (not a PO Box) and must be the address where all communications and notifications are sent. The address must also follow certain requirements regarding being an address that is open and accessible to the public for a least 3 hours during each business day.

If your business is run from a home base or you have yet to set up a public office, then you have the option of using a corporate service provider as your company’s registered address.

5: The Requirement for at Least $1 SGD in Shareholder Capital

Share capital is the money that the shareholders have invested into the company. This share capital must be maintained for the life of the company. At the time of incorporation, a minimum of $1 in capital must be paid.

While shares can technically be issued in any currency, for convenience Singapore dollars are preferred.

A key consideration in determining the level of share capital for a company is understanding that it is customary in commercial practice to expect a company to have a high level of share capital.  For example, when applying for a commercial lease, the prospective landlord is likely to request that the capital in the company be sufficient to cover the annual rental commitment.  

Similarly, if your company is sponsoring an individual for a working visa, the Ministry of Manpower is likely to request that the share capital of the company is equal to the annual salary of the employee applying for a working visa. 

Corporate Tax Residency for Singapore Companies

It is important to note that the mere fact that a company is incorporated in Singapore does not mean that the company is automatically a tax resident. In Singapore the tax residency of a company is determined by where the business of the company is controlled and managed.

The concept of control and management for a company does not mean where the day-to-day operations of the company are carried on – thus the location of the trading activities and physical operations are not considered. Rather, the concept of control and management is considered from a corporate governance perspective.

In Singapore, it is generally accepted that if a company holds its board of directors meetings in Singapore, it will be considered that control and management is being undertaken in Singapore – making the company a tax resident for the Year of Assessment.

It is important to note that Singapore corporate residence for tax purposes is determined by examining the facts as they stand in the Year of Assessment. Corporate residency in Singapore can change each year.

Notwithstanding the definition in the Act, the Inland Revenue Authority of Singapore (“IRAS”) in practice shall examine the preceding Year of Assessment to determine corporate residency.

Corporate residency is important as only Singapore resident companies will be able to obtain a Certificate of Residency from IRAS and therefore, apply any provisions of double tax agreements between Singapore and another jurisdiction. 

Starting a Company In Singapore

While there are a number of requirements involved in the establishment and running of a company in Singapore, the above five requirements cover the basic essentials needed to incorporate the company.

A trusted advisor like CST, will ensure that you have all your bases covered when you set up your Singapore company. We can act as your registered company address, provide Corporate Secretarial services, provide a nominee Director, and even assist with setting up a Singapore bank account. 

With our company incorporation services provided free when you sign up to one of our tax and accounting service packages, now is the time to contact us to discuss your company needs. 

Our Managing Director, Boon Tan, was recently featured in the Orient magazine (a publication produced by the British Chamber of Commerce in Singapore) discussing the key tax concessions available to Expats in Singapore.

Read the full article.

With the presentation of the 2019 Budget by Treasurer Heng, now is the time to start planning for the preparation of your personal tax return. With that in mind, this article outlines points for expats to consider when it comes time for preparation of your Singaporean income tax return.

The good news is that your Singapore tax return is not going to be hard to do. For many, the process takes 5 minutes and is done online.

Your return is due for lodgement each year by 15th of April. As there is no withholding tax, you will be required to make a payment of your tax liability upon receipt of your Notice of Assessment from Inland Revenue Authority of Singapore (“IRAS”). Alternatively, IRAS does provided for you to pay your tax liability in monthly instalments (interest free) via direct debits from your Singaporean bank account.

Why is tax so simple in Singapore?

The key to the simplicity is the nature of the Singaporean tax system which is a territorial based system.

Singapore only levies tax on income sourced here.

The term “sourced” means income that is generated in Singapore – e.g., employment income, interest paid by a local bank. Foreign income, such as rental income from your principal residence or investment property in your home country, is not taxed in Singapore – even if you bring the funds to Singapore.

Other income generated from interest, dividends, and capital gains on the disposal of assets anywhere in the world is all exempt from tax in Singapore. Besides, there are limited deductions that one can claim as an individual.

Notwithstanding this, here are some of the key concessions that you may be eligible to claim.

Not Ordinary Resident (“NOR”) Scheme and your tax residency

A key concession for expats to consider claiming as an employee based in Singapore is the NOR Scheme.

The NOR Scheme was introduced as an incentive to global firms to use Singapore as a regional base, and to bring talented individuals to the country. Under the NOR Scheme, you can pro-rata your taxable income based on the number of days you have worked outside of Singapore during the year – meaning that your effective tax rate can be reduced to a rate as low as 10%.

You can apply the NOR Scheme to reduce your tax rate by exempting part of your income, which in turn, will reduce the marginal tax bracket you fall into. Note that this is a concession under Singaporean taxation and does not mean that the untaxed income in Singapore is therefore taxable in the country you worked.

To qualify for the NOR Scheme, you must meet all the following criteria:

1. Your taxable income in Singapore must be at least $160,000;
2. Travelled for work for at least 90 days during the year;
3. You are a tax resident of Singapore in the year you are claiming the concession; and
4. Must not have been a tax resident of Singapore for the three years prior to the year in which you are applying the NOR Scheme.

You can claim NOR for the first five years that you are a tax resident of Singapore. If you do not qualify for the Scheme for one year during this period because you did not travel at least 90 days, you will lose one year of eligibility.

To apply for the NOR Scheme, you must lodge a claim each year at the time you file your tax return. Your claim must list the number of days and where you have worked outside of Singapore and must be certified by your employer as being correct.

In years that you qualify but fail to make a claim for the NOR Scheme when you lodge your return, you cannot go back and amend the return to claim the concession.

In the 2019 Budget, it was announced that the NOR Scheme would be stopped as of 31 December 2019. Therefore, the last claims to enter the NOR Scheme will be due with the lodgement of the YA2020 income tax return. Individuals who are already in the midst of their 5-year NOR eligibility period can continue to make the claim post the end of this year.

Tax reliefs

Singapore’s tax system provides tax residents with tax reliefs which reduce your taxable income. You can claim and apply as many reliefs that you are eligible for each year.

Five common tax reliefs that can be applied when preparing your tax return include:

1. Spouse relief
   If you are supporting a spouse who is not working and/or earning less than $4,000 from worldwide sources, you can claim a relief of $2,000.
2. Child relief
   You are entitled to claim relief for supporting a child equal to $4,000 per child regardless of where they live. Each child must be aged less than 16, or if over the age of 16 they must be in fulltime education (not necessarily here in Singapore) and cannot have an annual income of more than $4,000 from worldwide sources. The system recognises stepchildren and adopted children as qualifying for this relief.
3. Life insurance premiums
   You can apply a tax relief of up to $5,000 for the payment of life insurance premiums if your insurance provider has a branch or presence in Singapore. You may, therefore, be able to claim this relief for premiums paid in your home country.
4. Foreign maid levy relief
   If you are a woman working in Singapore and employ a maid which requires you to pay the foreign maid levy, you will be able to claim a relief equal to twice the levy amount paid for one domestic helper.
5. Professional course relief
   Up to $5,500 relief is granted if you enrol into a course, seminar or conference that leads to an approved academic, professional or vocation qualification. The relief is calculated based on the amount spent on fees, tuition, aptitude tests and registration fees incurred.

Donations

If you have made donations during the year to a local cause, you are able to claim a deduction of 2.5 times the amount you donated. To be able to make a claim, donations must be made in cash to the Government or any institution of public character which allows for their donations to be claimed at the 2.5 times rate.

Claiming everything you are entitled to

While the Singaporean tax system is a lot simpler than others around the world, you should speak with a qualified advisor ahead of lodging your personal return and ensure that you claim all the concessions you are entitled to.

About the author

Boon Tan is an experienced Accountant and has been working in the international tax advisory sector for over ten years. Born in Australia with Singaporean roots, Boon relocated to Singapore at the end of 2015.

As an expat living in Singapore, he has first-hand knowledge and experience of what expat families go through to establish themselves in a new city. He regularly draws on his in-depth understanding of the local Singaporean tax system and a network of in-country specialists in expat hot-spots around the world including USA, UK, Asia Pacific, and Australia to provide bespoke tax advice to clients.

Treasure Heng delivered the 2019 Singapore Budget on the afternoon of 18 February 2019. This Budget was the first Mr Heng delivered as the anointed leader of the Fourth Generation of Government leaders and marked the mid-term of the current Government.

At the end of Treasurer Heng’s Budget speech, we were given an outline of the focus for the current and future years on the areas including innovation, defence, infrastructure and community.

Whilst the headlines in the media have been on the expansionary nature of the budget, from an expat perspective there were two significant announcements made in the Budget Speech and annexures which have a direct impact on the expat community in Singapore.

Reduction in the Dependency Ratio Ceiling (DRC)

As an island, the scarcity of land means that Singapore’s greatest assets is human capital. The Singapore Government acknowledged early on of the need to develop human capital and therefore introduced programs and incentives for expats to bring their skills and knowledge to the country so that locals could learn and gain from their experience.

Different classes of visas for workers were introduced – Employment Passes for professionals, Work Permits for semi-skilled workers and S-Passes for technical staff.

As Singapore grew and the quality of its education system (from primary through to tertiary levels) developed, it was clear that the need to “import” a workforce with skills and knowledge could be reduced.

The DRC was introduced to legally cap the proportion of the employees that an employer could fill with foreign workers on Work Permits or S-Passes. Different industries have different requirements and therefore the DRC is set and reviewed regularly to account for economic conditions and the skillset of local Singaporeans.

The 2019 Budget has announced a reduction of the DCR for Work Permits and S-Passes over the next two years for the services sector.

For Work Permits, the current 40% reduced to 38% from 1 January 2020 before stopping at 35% from 1 January 2021. While the DCR for S-Passes will fall from 15% to 13% before capping at 10% over the same timeframe.

The services sector incorporates business services, insurance, retail and wholesale trade, hotels, communication services and the food and beverage industry.

Given that Work Permits and S-Passes have a duration of two years, the structural changes to the workforce will be impacted immediately as the DCR will be taken into consideration during the renewal process for individuals on these passes over the next two years.

Removal of the Not Ordinary Resident (NOR) Scheme

Whilst the quotas for professionals holding an Employment Pass have not been changed, a significant announcement affecting these expats was the removal of the NOR scheme from 31 December 2019.

The NOR Scheme was designed to act as an incentive for multi-national companys to base global or regional roles here in Singapore. Under the NOR Scheme, individuals meeting the eligibility criteria are able to pro-rata their taxable income to take into account the number of days that they were outside of Singapore for work. The proportion of taxable income related to work outside of Singapore was not subject to Singapore tax.

Individuals can only apply the NOR Scheme for a maximum of five years from the first year that they are eligible – for many expats this will be the first five years that they are in Singapore.

The effect of the announcement means that expats must ensure that they make the claim for the NOR Scheme when they prepare their return in 2020 as this will be last year in which you can be granted NOR status and obtain the ability to claim NOR in the years after the end of this year.

Individuals who have already been granted NOR status can continue to claim the scheme as long as they meet the annual eligibility requirements.

What should you do now?

As a business owner you should now consider your human resource requirements and look at how the DRC changes will affect your pool of talent. Where appropriate, consider the business’s eligibility to apply for an Enterprise Development Grant to assist with the upskilling of staff or the restructure of workplace processes through the implementation of technology.

For individuals who have just arrived in Singapore, ensure that you are aware of the NOR Scheme eligibility criteria and make sure that you lodge an application for NOR status with the lodgement of your tax return in 2020.

In both cases, seek professional advice and guidance to ensure that you are ready for the change.

About the Author – Boon Tan

With his Singaporean ties and Australian upbringing, Boon has a first-hand appreciation of what it is like to establish yourself and your business as an expat in  Singapore. He regularly draws on his in-depth understanding of the local Singaporean tax system and a network of in country specialists in expat hot-spots  around the world including USA, UK, Asia Pacific and Australia to provide bespoke advice to his clients.

Overview Of Tax Residence Rules

The Singapore Tax Act classifies taxpayers as either residents or non-residents. This is important because residents and nonresidents are taxed in a different manner.

Note that the concept of “domicile” is not relevant for Singapore income tax liability. “Residence” is the relevant test and this is defined under Section 2 of the Singapore Tax Act.

The definition includes a “qualitative test” as an individual who “resides” in Singapore in the year preceding the year of assessment is regarded as a tax resident in Singapore.

This turns on a number of factors. The term ‘reside’ is not statutorily defined and therefore it is to be given its ordinary meaning when interpreting Singapore law.

Celebrating Singapore’s 50th year of independence, the 2015 budget was delivered by the Deputy Prime Minister and Minister for Finance on 23 February 2015. Also known as the “Jubilee Budget”, much of the focus in the budget has been placed on the country’s ability to provide the required resources to Singaporeans for their future, for example, through promoting innovation and by providing tax incentives to encourage the businesses for their international efforts.

Below are some of the highlights:

Corporate Income Tax Rebate

The Corporate Income Tax Rate remains at 17% and the partial tax exemption of a company’s first $300,000 of normal chargeable income (CI) is also to stay in place. The Corporate Income Tax Rebate which allows companies to receive a 30% rebate on their tax payable to a cap of $30,000 will be extended for another two Year of Assessments (YAs) until 2017 YA. However, the maximum rebate will reduce to $20,000 in 2016 and 2017 YAs from current $30,000. Companies that have chargeable income less than $540,000 (ie. in YAs 2016 and 2017) will not be affected by the new measure.

Change in Top Marginal Tax Rate

The marginal tax rates for the highest income earners with chargeable income above $320,000 will increase from 20% to 22%. However, the government has also announced a personal income tax rebate of 50% capped at $1,000 per taxpayer, which is be granted to all tax resident individual taxpayers for YA 2015.

Double Tax Deduction for Internationalisation Scheme

Businesses may claim 200% tax deduction on qualifying expenditure incurred on qualifying market expansion and investment development activities. The scope of qualifying expenditure supported under the Double Tax Deduction (DTD) for Internationalisation scheme will be enhanced to include qualifying manpower expenses incurred for Singaporeans posted to new overseas entities.

The amount of qualifying manpower expenses to be allowed a DTD will be capped at $1m per approved entity per year for expenses incurred from 1 July 2015 to 31 March 2020.  Businesses will have to apply to International Enterprise (IE) Singapore to enjoy the concession on manpower expenses. Further details to be released by May 2015.

Introduction of International Growth Scheme (IGS)

This is a new scheme by the Government with the aim of providing greater and more targeted support for larger Singapore companies in their internationalisation efforts. Under the IGS, qualifying Singapore companies will enjoy a concessionary tax rate of 10% for a period not exceeding five years on their incremental income from qualifying activities such as headquarter functions and specific business lines. IE will release further details by May 2015.

Approved Royalties Incentive (ARI)

The ARI was introduced to encourage companies to access cutting-edge technology and know-how for substantive activities in Singapore. Under the scheme, tax exemption or a concessionary tax rate may be granted on approved royalties, technical assistance fees or contributions to R&D costs made to a non-resident for providing cutting-edge technology and know-how to a company for the purpose of its substantive activities in Singapore.  A review date of 31 December 2023 will be legislated for this scheme to ensure that the relevance of the scheme is periodically reviewed.

Productivity and Innovation Credit (PIC) Scheme & PIC Bonus

The Productivity and Innovation Credit (PIC) scheme was enhanced in 2011 to grant a total of 400% tax deduction or allowance for the first for the first $400,000 of expenditure for qualifying expenses incurred from YA 2011 to YA 2018. The qualifying activities are (subject to conditions):

• R&D activities
• registration of intellectual property rights (IPR)
• acquisition of IPR
• investments in design done in Singapore
• spending on equipment or software aimed at automating processes; and
• costs of training employees so as to upgrade skills and capabilities

To encourage small businesses to undertake meaningful productivity investments, businesses that invest a minimum $5,000 per YA in qualifying activities under the PIC scheme are entitled to the cash bonus (PIC Bonus) equal to the PIC expenditure incurred up to an overall cap of $15,000 for all three YAs combined (YA 2013 – YA 2015). There has been a good take-up of the PIC scheme and the PIC Bonus will be allowed to expire after YA 2015 as it was intended as a transitional measure. However, businesses will continue to benefit from the PIC scheme extended until YA 2018.