Singapore has enabled the Goods and Services Tax (GST) in 1994. The GST is the equivalent of the value added tax (VAT) in Europe. Introducing the GST marked the beginning of a new taxation system of Singapore. The Inland Revenue Authority (IRAS) is the main regulatory body of the Singapore taxation system and all companies conducting business operations must register for VAT with the IRAS. The introduction of GST has taken place in order to reduce the corporate tax and the tax applied to personal incomes. Starting 2013, the value added tax rate in Singapore is 7%.
The value added tax, or goods and services tax as it is called in Singapore is a consumption tax applied to all goods and services provided in the city-state. The GST also applies to imported goods. The goods and services tax is considered an indirect tax because it is paid by the final consumer and it is not levied on the company that produces or distributes the product or supplies the service. Singapore companies will only collect the GST.
Not all companies are required to register for VAT with the IRAS in Singapore. However, companies must be aware of their balances all the time and when required they must register for GST. There are situations when GST registration is voluntary and situations when it becomes compulsory. Singapore companies must register for VAT if the turnover of their business undertakings exceeds 1 million S$ in the last 12 months and when the turnover for the next 12 months is expected to exceed 1 million S$.
Companies can opt to register for GST with the tax authorities if the business’ turnover has not exceeded 1 million S$ and if it exports the goods it produces. Financial institution providing money services that are considered international services are not required to register for GST in Singapore. Companies opting to register for VAT in Singapore have the possibility to claim for refund of the input tax.
In order to register for GST in Singapore, companies must file certain forms that vary depending on the type of structure. Foreign companies must appoint a local agent to file the documents on their behalf. The registration process will take about 3 weeks to complete.