30 July 2019
From 5 to 26 July 2019, the Ministry of Finance (“MOF”) sought feedback on the draft Goods and Services Tax (Amendment) Bill 2019 (“draft Bill”). Among other things, the changes in the draft Bill relate to the planned imposition of goods and services tax (“GST) on imported services from 1 January 2020, and seek to update the GST treatment for digital payment tokens.
Proposed amendments relating to GST on imported services
The proposed amendments relating to the planned introduction of GST on imported services from 1 January 2020 are as follows:
- Refine the design parameters for GST on imported services
From 1 January 2020, GST will apply to imported digital services in the context of business-to-consumer (“B2C”) transactions by way of an Overseas Vendor Registration (“OVR”) regime. Under the regime, overseas suppliers that have significant B2C business activities in Singapore are required to register, charge and account for GST on such sales. For business-to-business (“B2B”) supplies of imported services, GST will be applied by way of a Reverse Charge mechanism.
The proposed amendments in the draft Bill seek to clarify or improve GST administration for imported services, such as by clarifying the scope of the Reverse Charge mechanism and allowing GST group registration for overseas businesses under the OVR regime.
- Introduce an offence for misrepresentation of information
Unlike the GST regime currently in place for local GST-registered suppliers, suppliers under the OVR regime operate overseas and rely on declarations made by customers to determine if GST is applicable. It is proposed to amend the Goods and Services Tax Act to make it an offence for a customer to provide false information in relation to purchases of imported services, where such information may be used by overseas suppliers registered under the OVR regime to determine whether GST is chargeable.
Other proposed amendments
The draft Bill provides for three other proposed changes to existing tax policies and administration, arising from a periodic review of Singapore’s GST system.
- Update GST treatment of digital payment tokens
Amendments to the Goods and Services Tax Act are proposed to update the GST treatment of digital payment tokens, based on the nature of the underlying transactions.
It is proposed to (i) exempt from GST the exchange of digital payment tokens for fiat currency or other digital payment tokens, as financial services, and
(ii) not subject to GST the use of digital payment tokens as a means of payment for goods and services. Currently, the sale and transfer of digital payment tokens are regarded as supplies of services, and are subject to GST. The proposed amendment more accurately reflects the characteristics of digital payment tokens and updates the GST rules to ensure that they remain relevant in the digital economy.
Separately, from 5 to 26 July 2019, the Inland Revenue Authority of Singapore (“IRAS”) sought feedback on a draft Goods and Services Tax Guide on Digital Payment Tokens. The draft guide explains the GST treatment for transactions involving virtual currencies / cryptocurrencies that function or are intended to function as a medium of exchange.
- Make changes to the reporting of proceedings and decisions of tax cases by the High Court and Court of Appeal
To align with the principle of open justice and in keeping with international trends, tax proceedings in the High Court and Court of Appeal will no longer be heard in private by default. The redaction of taxpayers’ names in published decisions of such judicial proceedings will also be discontinued. The proposed amendment will place tax proceedings in the courts in the same position as other judicial proceedings where private hearings and confidentiality orders may still be granted at the discretion of the courts. Similar amendments will be made to the Income Tax (Amendment) Bill 2019.
- Introduce definitions of “accountant” and “advocate and solicitor” for purposes of appeals to the GST Board of Review (“GSTBR”)
With the proposed amendment, only a “public accountant” within the meaning of the Accountants Act, or an “advocate and solicitor” within the meaning of the Legal Profession Act, is allowed to represent a taxpayer before the GSTBR. This amendment safeguards the interests of taxpayers who lodge appeals to the GSTBR, by ensuring the representatives handling their appeals meet certain professional qualifications. These definitions are consistent with those in the Income Tax Act, for the purposes of appeals heard before the Income Tax Board of Review.
The following materials are available on the MOF website www.mof.gov.sg:
- MOF press release
- MOF public consultation
- Draft Goods and Services Tax (Amendment) Bill 2019
- Draft Goods and Services Tax subsidiary legislation
- Summary table on proposed changes to the Goods and Services Tax Act