What is GST?
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What is the GST? It is a unique tax registration number for the supply of goods and services in the countries where the GST operates.
By the GST regime in force in some countries, all registered taxpayers are combined into one single platform within each country to comply with legislation on goods and services tax. By registering on such a platform, the administration is carried out centrally.
Each country in which the GST system operates has its thresholds at which enterprises with a cumulative turnover exceeding a specific limit are required to register under the GST. In this case, we are talking about mandatory registration. As a general rule, small providers are not required to obtain a GST number. However, voluntary registration as a GST payer is always allowed, and thresholds will not be required in this case.
GST is an indirect tax, expressed as a percentage, levied on the value of the sale of goods and services by businesses registered in Singapore to pay GST. The final consumer pays the goods and services tax; therefore, such a tax, as a rule, is not an expense item for companies. Companies simply act as tax collectors on behalf of the tax authority.
Do you need to register for GST in Singapore?
GST is self-assessed, and you should regularly review your tax registration requirement to pay GST. Such registration is divided into two categories: compulsory and voluntary.
Compulsory registration. GST registered company Singapore as a taxpayer is mandatory in the following cases:
- Your business’s turnover has exceeded S $1 million in the past 12 months, retrospectively.
- If you currently have active sales and reasonably believe that your business will turnover over S $1 million in the next 12 months is a promising basis.
Please note that there will be penalties for refusing to register with GST Singapore. There are provisions in the country aimed at combating tax evasion. Economic entities are created only to split profits to avoid exceeding the threshold value and, therefore, the need for tax registration.
Voluntary registration. You are eligible to register for GST voluntarily if you do not meet the mandatory registration criteria and meet the following conditions:
- The annual turnover of your business does not exceed 1 million Singapore dollars.
- Your products are only exported (tax-free goods).
- You provide tax-free financial services that are also considered international.
The benefits of a voluntary GST registered company in Singapore are that you are eligible for a tax deduction after payment of incoming tax in the course of your business. This benefit is especially true if you are a supplier of only those goods and services taxed at a zero rate (export goods or international services).
From your registration date as a GST taxpayer, you must remain on record for at least two years and must retain all of your records for at least five years, even if your company ceases to operate and you are de-taxed. You are also required to comply with all additional conditions imposed by the tax authorities.
Registration exemption. If you are a supplier of only those goods and services taxed at a zero rate, you are eligible to apply for an exemption from registration, even if your turnover exceeds the thresholds. This opportunity gives you the right not to comply with the administrative requirements for registering as a GST taxpayer; you will only claim the tax for deduction without transferring it to the country’s tax office since your expenses here are to pay the incoming tax.
The IRS approves an exemption if more than 90% of all your products are taxed at a zero rate and if your incoming tax is higher than your outgoing tax.
Removal from the register. You have the right to be deregistered if the business is discontinued or sold entirely to third parties and if your sales do not exceed S $1 million. An application for deregistration and several other relevant documents are submitted to the tax authority within 30 days from the date of termination of activities.
How to register for GST Singapore?
If a company is not required to register, should it still register as a GST taxpayer?
It depends on the circumstances. If you are required to register for GST, you have no choice. In other circumstances, you must weigh up the pros and cons of registering as a GST.
Benefits for the state:
- It is stable and has predictable tax payments in both good and weak economic conditions.
- It is tax-efficient due to its relatively low management and collection costs.
- It allows the government to lower taxes on personal and corporate income, attracting more foreign direct investment. Overall, all of this contributes to economic growth.
Benefits for businesses and individuals at register GST Singapore:
- Most large and reputable companies have registered for tax registration to pay GST; such registration often serves as a signal to customers that your business is well established and boasts a large size.
- GST is a fairer tax system. The tax is levied on self-employed and working citizens only when they spend their funds.
- The goods and services tax applies only to consumption. Savings and investments are not taxed; this is pushing citizens to save money and invest in manufacturing industries.
- Doing business becomes cheaper, which contributes to lower prices. Business does not suffer from the tax burden due to the multistage mechanism of granting benefits since the actual taxpayer here is the final consumer.
How to register for GST Singapore? Disadvantages:
- The disadvantage of being registered as a GST taxpayer is the administrative burden that accompanies the performance of duties after registration.
- You need to either learn all the subtleties of the GST system or hire an accountant, which in some cases can be very expensive.
- Registration increases your selling price by 7%. Your customers who are not registered as GST taxpayers will not be eligible for reimbursement for the goods and services tax paid to you. So, while your costs are dropping while you are eligible for compensation, your customers may be far from jumping for joy.
- Tax on goods and services can be a burden for low-income groups, especially in high inflation situations where the already rising price of everyday items is taxed at 7%.
How to open a company in Singapore? Without outside help (a Singapore resident will be needed to register the name), you cannot complete this task. Therefore, the first and most important point in further actions should be an e-mail to an expert.
What you need to do to open a company in Singapore:
- Come up with and reserve a company name. It should be light, memorable, and unique. Of course, any allusions with well-known trademarks are not allowed; otherwise, you may subsequently be drowned in endless lawsuits. If a regional branch is opened, it can add the name of the jurisdiction to the company name. The check by the registrar takes no more than one day and is reserved for you for two months.
- This work can only be done by a Singapore resident (your lawyer, agent, or registrar) who has a special code.
- Prepare constituent documents. In addition to data on all founders, they should contain information about the company’s actual location. It is through him that you will carry out correspondence with the official bodies. An actual presence in Singapore is much more desirable than a formal address. And the cost of maintaining a real office will be relatively small.
- Submission of data to ACRA (Accounting and Corporate Regulatory Authority). If you approach the preparation responsibly, then a positive outcome is guaranteed to you. The registration fee is 330 SGD. It is impossible to submit documents on your own. As in the company name, this function should be taken over by an attorney, agent, or special registrar. You will also be required to indicate two activities that your company will be engaged in. Registration with IRAS (Inland Revenue Authority of Singapore) is automatic. Many additional activities (hiring personnel, special activities, etc.) will require special licenses.
What goods and services are subject to GST?
This tax is levied on all categories of goods and services subject to taxation. Taxable categories are goods and services originating from Singapore, excluding non-taxable groups. The tax rate for these categories can be standard or zero. Most domestic sales of goods and services are subject to the standard tax rate.
Goods and services with a zero tax rate are subject to 0% GST. A registered Singapore company registered as a GST taxpayer and is a zero-tax supplier of goods and services is eligible for an after-input tax deduction on operating costs. In Singapore, export goods and services rendered internationally are taxed at a zero rate.
Tax on goods and services is not levied on categories that are not subject to taxation; these are the sale and lease of land for residential buildings and financial services. The difference between the zero tax rate and the non-taxable categories is that a non-taxable goods and services company is not eligible to claim a GST input tax deduction.
The categories not taxed on goods and services are not covered by the Goods and Services Tax Act. In general terms, these are:
- Alienation of a business within the framework of the principle of business continuity
- Private transactions
- Sales between Third Party Countries The sale of goods from one country, excluding Singapore, to another, again excluding Singapore
- Zero GST Warehouse sales
What is the essence of the tax registration process for paying GST?
The tax authority, along with several required supporting documents, is submitted with an application form for registration for payment of tax on goods and services (GST F1) in Singapore. In the case of a partnership, an additional form (GST F3) is filled out indicating the data of all partners. Foreign companies and those who register a group of companies or a division have access to separate procedures/forms of registration. Overseas companies must appoint a local representative to act on their behalf based on a power of attorney and application. The registration process takes approximately three weeks. After successful registration, you will receive a notification and a letter of registration for the goods and services tax payment. The letter will include your taxpayer number, reporting frequency and deadline requirements, and other special instructions. Goods and services tax returns are filed electronically.