With effect from 1 January 2020, GST will be applied to cross-border Business-to-Customer (B2C) supplies (such as supplies made to individuals and businesses that are not registered for GST in Singapore) of imported digital services through the overseas vendor registration (OVR) regime. This is to achieve parity in GST treatment regardless of whether the service is procured from overseas or locally.
According to the guidelines published by the Inland Revenue Authority of Singapore (IRAS), ‘digital services’ are services supplied over the internet or an electronic network, where the supply is automated and involves minimal or no human intervention, and is impossible without the use of information technology. These include the supplies of digital products, subscription-based and licensed content as well as support services to arrange or facilitate, via electronic means, the provision of transactions that may not be digital in nature.
Under the OVR regime, any supplier belonging outside Singapore that has a global turnover exceeding SGD 1 million and makes B2C supplies of digital services to customers in Singapore exceeding SGD 100,000 is required to register, charge and account for GST under a simplified pay-only regime on a quarterly basis.
Under certain conditions, a local or overseas electronic marketplaces operator may be regarded as the supplier of the services made by the suppliers through these marketplaces, and hence, they are required to register, charge and account for GST on these supplies, instead of the suppliers.
An overseas supplier or overseas electronic marketplace operator will be liable for GST registration under either the retrospective or prospective basis, if the following conditions are met:
Where the global turnover and value of digital services made to non-GST registered customers in Singapore exceed SGD 1 million and SGD 100,000 respectively at the end of any calendar year (that is, 1 January to 31 December).
However, if the global turnover or value of digital services made to customers in Singapore in the next calendar year does not exceed SGD 1 million and SGD 100,000 respectively, and this can be substantiated by documentation, there is no liability for GST registration.
Where the value of global turnover and supplies of digital services to non-GST registered customers in Singapore is expected to exceed SGD 1 million and SGD 100,000 respectively for the next 12 months.
Businesses making sales of digital services to Singapore customers should first assess if the services fall within the scope of digital services under the OVR rules. Thereafter, review the customer base to ascertain the total value of digital supplies made to Singapore customers, and check if the customers are GST registered by requesting the GST registration number. To verify that the customers are indeed registered for GST in Singapore, a check may be done via the “Register of GST-registered Businesses” on the IRAS website.
IRAS has sent letters to overseas companies who may potentially be liable for GST registration under to OVR regime to submit the application. Our team of GST specialists can help to assess if the OVR rules would apply and advise on the appropriate course of action.
Chin Sien Eu