Goods and Services Tax | Zenit Accounting

Goods and Services Tax ("GST") in Singapore

Not sure how to deal with GST? Speak to us.

What is GST

GST is a broad-based tax on domestic consumption, it is also known as value added tax (VAT) in other jurisdictions. GST is charged to the end customer and the business selling the goods or services is responsible for charging and collecting the the tax from its customers as well as paying the tax to the IRAS, effectively, the business acts as a collection agent for IRAS. The tax is applied at the prevailing GST rate. The current rate in Singapore is 7%, although the Government has announced an intention to hike the rate to 9% in the near future.

There are certain services exemptions such as the provision of most financial services, supply of digital payment tokens, the sale and lease of residential properties and trading of investment precious metals.. GST is also levied on imported goods while export of goods and certain types of services provided to overseas clients are not charged GST.

Who is required to register for GST

GST can only be charged by GST registered businesses. Only businesses that exceed S$1 million in annual taxable turnover are required to be registered. However, companies with revenues below this threshold can voluntarily register as well.

The GST that a business collects from customers is called output tax. Conversely, GST paid on a business's purchases or paid to its suppliers is called input tax. A GST-registered business can claim credit for its GST input tax thereby only paying GST on the amount of value-add, which is calculated as the difference between its output and input tax. This allows companies to lower its cost by claiming credit on its input tax as output tax are eventually pass on to the end customer.

Why should a business voluntarily register for GST?

A business may wish to consider the following:

Turnover is near S$ 1 million: it takes away the burden of monitoring turnover constantly.
Cost and responsibilities of GST submission, including filing tax return monthly or quarterly
Significant purchases from suppliers who are GST-registered. The ability to claim input tax will improve profitability.
GST-registered customers will prefer the business to be GST-registered in order for the customers to be able to claim input tax.
However, if customers are not GST-registered, increasing selling price to include GST may make the business' products or services uncompetitive.
GST must be charged to customers. You can either markup your prices, absorb GST or something in between.
If you mark up your prices, you may lose customers due to price increase if you a B2C business or if you are selling to non-GST registered business.
If you are a B2B business and most of your clients are GST-registered, you can increase prices without losing customers as your customers can claim back the GST.

WHAT YOU NEED TO KNOW ABOUT GST

GST registered businesses must file a GST Form 5 tax return to IRAS on a monthly/quarterly basis. In the case of no GST transactions, the business must still file a nil return.

In filing Form 5 tax return, companies must report both their input tax and output tax.

If the output tax is greater than the input tax, company must pay the net amount to IRAS.
On the other hand, IRAS owes the company a refund if the input tax is greater than the output tax

Companies must pay the tax to IRAS within 1 month after filing a Form 5 tax return.

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What is a Registered Address?

In ACRA’s definition, registered office address is where all communications and notices to the company are addressed to, and where the company’s registers and records are kept. The registered office must be an address in Singapore, but it need not be the place of operation. For instance, your company’s registered office address may be in Raffles Place but your factory could be located in Tuas.
How do we open bank accounts in Singapore?

Fintech bank account providers will readily accept online applications. On the other hand, brick and mortar banks only provide online applications for selected groups of customers and may require the applicant to visit the branch to meet a banker face to face. Right now, we also work with some banks to do account opening via video calls to facilitate account opening for overseas clients.
Can you open a bank account for me?

We can assist our clients to set up bank accounts in Singapore.
How should I allocate my shares, is it important?

The share system offers extensive flexibility, meaning shares can fall into numerous categories, depending on how the company decides to structure its stock. Find out more about the different classes of shares and how the allotment of shares impacts your company by contacting us.
What is paid-up capital and how much should I put?

Paid-up capital refers to the total funds a company receives from shareholders in exchange for equity. It is required to be contributed in cash or in kind to the company. The funds can be as low as $1, but we generally recommend that you start with at least a few thousand dollars of paid-up capital to show that the company has some substance and not purely a shell company.
Sole Proprietorship vs Pte Ltd

Sole Proprietorships and Private Limited Companies (Pte. Ltd.) each have their pros and cons. To understand what works better for you, there are a few factors that you have to take into consideration.
What is a nominee director & who can be a nominee director?

All Singaporean companies are required to onboard at least one local director on their company’s board. Companies that do not have local directors may choose to appoint a nominee director to meet the requirement.
Can I be my own company secretary? What does a company secretary do?

You can be the secretary of the company if you are a local and not the sole director. However, it is important to engage a secretary who is clear on the statutory requirements of the company e.g. Annual General Meetings, ACRA Annual Return, IRAS ECI and Form C-S.
How do I decide on my company Financial Year End (FYE)?

The company’s Financial Year End (FYE) is typically a date which is the last day of the month. We recommend choosing the last day of the previous month if you don't have any particular preference (eg. If we are in the middle of May, we recommend 30 April). This will maximise your tax breaks as a start-up company.
What companies require Special Approval?

Companies under selected industries or with names containing certain words will be sent to the respective referral authority.
What is the difference between a standard and special resolution?

Examples of Standard Resolutions are: 1. Change in Company's Registered Address 2. Appointment or Resignation of Director 3. Change Financial Year End 4. Change of Primary or Secondary Business Activity 5. Change company name 6. Update of Company Officer's Personal Particulars ‍ Examples of Special Resolutions are: 1. Changes in the company’s Constitution 2. Share-Related Transactions ‍ Find out more about resolutions here.
Can Work Permit / S-Pass holders be a Director or Shareholder?

No. S Pass or Work Permit holders are not allowed to carry on or manage any business in Singapore.
What is a Company Constitution?

A company's constitution (formally known as the Memorandum and Association) is a legal document that: Describes the key characteristics of the Company Contains the rules and regulations for its governance Describes how its operations will be carried out Outlines the rights and responsibilities of the Directors, Shareholders and Company Secretary ‍ The Company's Constitution must be submitted to ACRA upon application.
What is an Annual General Meeting (AGM) and how is it linked to my Annual Return Filing (AR)?

An Annual General Meeting (AGM) is one of the yearly compliance requirements for all Singapore companies. It is held to keep the company’s shareholders updated with the business health, financial performance as well as to lay out important matters such as reelection of directors. The company’s Annual Return (AR) is filed after the AGM has been held.
Do I need a company secretary?

The Company Law in Singapore mandates that every company must appoint a Company Secretary, and the position must not be left vacant for more than 6 months at any point in time. The Company Secretary is responsible for ensuring that the company complies with the relevant legislations and regulations.