The Parliament had passed a Goods and Services Tax (Amendment) Bill that allows the government to collect GST from overseas services from the year 2020. These include video streaming, apps, listing fees on electronic marketplaces, software and online subscription fees.
This comes as part of the government looks to impose overseas vendor registration regime on business-to-consumer services here in Singapore. Business-to-consumer consultancy and advisory services will be subject to GST if the services meet the definition of digital services. This is if the service supplied over the internet or other electronic networks has minimal or no human intervention.
Overseas suppliers with a total value of supplies amounting to SG$1 million at the end of the year 2019 or any subsequent calendar year, and with its digital supplies exceeding SG$100,000 will be required to pay GST. However, tax will not be charged on any supply of services that takes place before 1 January 2020.
Many have raised questions if services such as Netflix, iflix and Spotify would fall under the amended bill. When contacted by Marketing, a Netflix spokesperson said the video streaming platform pays relevant taxes where applicable and look forward to further details. Marketing is pending responses from iflix and Spotify.
Meanwhile, business-to-business imported services will be placed under a reverse charge system. Local GST-registered businesses will have to impose GST on the overseas imported services. However, local businesses will not need to account for services they import if a full refund of GST incurred on their purchases can be claimed.
In a video posted on CNA, second minister for finance Lawrence Wong said that this move is line with the global movement of taxation in the economy. The regime was built by learning from other jurisdictions and consulting industry players. These include the business advisory committee to the OECD, the Singapore Retailer’s Association and Association of banks in Singapore.
He added that these proposed features enable the government to focus on its GST enforcement for imported services on overseas vendors. For overseas suppliers with business-to-consumer services, Inland Revenue Authority of Singapore (IRAS) will source information while conducting audits, similar to the approach on domestic traders. IRAS can also provision in bilateral tax agreements to obtain information on overseas vendors from other tax jurisdiction.
According to the Wong, there is no anticipation of compliance issues as other jurisdictions have practiced a similar approach on taxes and that these multi-national businesses are “likely to comply” to avoid reputational damage. The new bill is expected to bring in a revenue of SG$90 million per year.
This move seeks to defend our current revenue base from being eroded as more and more transactions move online.
In addition, concerns on GST imposed on online advertising services is based on the place of circulation of the ads. Under existing rules, media ads that are circulated substantially or wholly outside Singapore, qualify for zero rating. Likewise, if this is provided by overseas suppliers, such advertising services are not subject to GST.
Ads viewed on the internet is regarded as global, as such these ads can qualify for zero rating, and correspondingly will not be subject to GST under the overseas registration regime.