Goods and Services Tax in Singapore: New Obligations for Digital Service Providers

• Singapore issued the Overseas Vendor Registration regime, which obligates foreign digital service providers to register and pay for goods and services tax (GST).
• Businesses will need to have a yearly global turnover of more than S$1 million (US$738,000) and sell more than S$100,000 (US$73,800) to be obligated to pay the seven percent GST rate.
• The government is also planning to increase the GST rate to nine percent between 2021 and 2025.

Starting January 1, 2020, foreign digital service providers have to register and be charged for goods and services tax (GST) under Singapore’s Overseas Vendor Registration (OVR) regime. Previously, only services procured from local businesses were subject to GST.

GST, also known as value-added tax (VAT), is a consumption tax imposed on goods and services in Singapore regardless if they are acquired from domestic or overseas suppliers. The current GST rate is seven percent.

The GST that is charged on customers is known as ‘output tax’, and the GST that is incurred on business purchases and expenses, which includes the import of goods, is known as the ‘input tax’. The difference between the output and input tax is the net GST payable to the government.

GST on overseas digital services

The OVR regime is aimed at creating a ‘level playing field’ by protecting local retailers – Singapore imported more than US$200 billion worth of services in 2018. Additionally, the government hopes to gain S$90 million (US$66 million) in yearly tax revenues.

As GST is a self-assessed tax, businesses are required to assess their need to register for GST. Foreign digital service providers will need to have a yearly global turnover of more than S$1 million (US$738,000) and sell more than S$100,000 (US$73,800) worth of digital services to Singaporean customers, during a 12-month period, to be obligated to register and be charged GST.

The digital services subject includes:

• Downloadable mobile applications, e-books, and movies;
• Subscriptions to TV shows, music, and online gaming; and
• Downloadable drivers, software, and firewalls.

GST rate increase in 2021

The government is planning to increase the GST rate to nine percent between 2021 and 2025. The main justification for this rise is to fund future infrastructure projects and increase social spending on social welfare.

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