With effect from 1 January 2020, there will be a Goods and Services Tax (GST) levied on imported services.
Currently, GST only applies to local suppliers and not overseas ones. In a bid to level the GST treatment, the change in GST charges was announced by Minister of Finance in Budget 2018.
The regime is intended to apply to the relevant services that would be subject to the GST charges if they were from local suppliers in Singapore. As such, the regime will not be applicable to intangible services (such as financial services) that are exempt from GST.
Change
This change entails a reverse charge regime for Business-to-Business (B2B) supplies of imported services and an overseas vendor registration regime for Business-to-Consumer (B2C) supplies of imported digital services.
(B2B supplies: supplies made to GST-registered persons, including sole-proprietors, partnerships and companies.
B2C supplies: supplies made to non-GST registered persons, which include businesses and individuals not registered for GST.)
Reverse Charge Regime for Business-to-Business Supplies
This would generally only apply for GST registered businesses who are not entitled to a full input tax credit for the imported services. Businesses are required to account for GST on all imported services as if you are the supplier, except for those excluded from the given scope.
The corresponding GST is claimable as input tax, subject to normal input tax recovery rules.
For recipients of imported services who are currently not GST-registered, if the acquisition of these services exceeds S$1 million within a 12 month window, registration is required.
Overseas Vendor Registration Regime for Business-to-Consumer Supplies
If your annual global turnover exceeds S$1 million and you make more than S$100,000 in digital services sales to consumers in Singapore, you are liable to register and pay GST.
In certain cases, if you are an electronic marketplace operator, you could be deemed as the supplier of the digital services and held liable for the GST charges. It would be beneficial to review existing contracts to determine if there are necessary changes that need to be made with regard to the new GST rule, and if so, account for them accordingly.
Sources:
https://www.iras.gov.sg/irashome/GST/Consumers/GST-on-Imported-Services/