If your taxable turnover in Singapore exceeds $1 million at the end of any calendar year, you must register for GST from 2019 onwards. If you reasonably expect your taxable turnover in the following 12 months to exceed $1 million, you must additionally register for GST.
What exactly is the goods and services tax?
GST, or Products and Services Tax, is a consumption tax charged on the majority of commodities and services in Singapore, as well as imported goods. This tax is generally known as Value-Added Tax in other nations (VAT). The GST rate in Singapore is now 7%, but the government has already committed to raising it to 9% by 2025.
Singapore Customs collects GST on imported items, but GST on products and services sold in Singapore is collected by companies when they sell products and services. DPM Heng Swee Keat revealed in his Budget 2021 address that any smaller-ticketed products purchased online from outside would be subject to GST as well.
The reason for all of this is because GST is a significant source of revenue for Singapore’s government. In 2020, the Singapore government collected $9.9 billion in GST, accounting for more than 15% of the overall operating income collected by the Singapore government. The government may spend more if the collection pot is larger.
When do companies need to register for GST?
When a company formation Singapore procedure’s taxable turnover exceeds $1 million, it is required to register for GST in two ways: retrospectively and prospectively.
#1 Retrospective perspective
Beginning January 1, 2019, enterprises in Singapore must register for GST if their taxable turnover exceeds $1 million in a calendar year. You can use the IRAS Tax Registration Calculator to assist you with this evaluation.
#2 Prospective view:
Business registration Singapore experts who anticipate a taxable turnover of more than $1 million in the coming 12 months will be required to register for GST as well. In order to become GST-registered, you must additionally provide supporting documentation like as:
- Contracts or agreements that have been signed
- Quotes were accepted, and purchase orders were signed.
- Customers’ invoices with set monthly rates
- The income statement for the last 12 months shows that turnover has already approached $1 million and is on the rise.
Business registration Singapore professionals must apply for GST registration within 30 days after being liable to register. Though you do not apply by the time, you may be responsible for GST on your turnover even if you did not collect it from your consumers. You might potentially face a $10,000 fine and a penalty equivalent to 10% of the GST owed.
There are two major exclusions that allow you to avoid GST registration:
- If your taxable revenue is entirely or primarily comprised of zero-rated sales Typically, zero-rated commodities are exported. This is often used for items sold to international clients or things that will be sold to international customers. Zero-rated services are generally for foreign services, such as a website that collects ad income but serves readers outside of Singapore. The IRAS website has a comprehensive list of foreign services.
- If you are required to register for GST in retrospect but not in prospective view. This implies that if your taxable turnover exceeds $1 million in a calendar year (retrospective perspective), but you are winding down or have supporting papers proving that your taxable turnover will not exceed the level in the future (prospective perspective), you may be excluded.
How do you determine your taxable turnover?
Calculating your firm’s taxable turnover may differ based on the type of business registration Singapore procedure you run.
the total turnover of all your sole-proprietorship firms as well as revenue from your trade, profession, or vocation. All sole-proprietorship enterprises under your name, including ones you establish in the future, will be GST-registered.
The total turnover of all partnership enterprises with the same partner composition.
The company formation Singapore procedure’s turnover. If your firm owns sole-proprietorship firms, you must combine the firm’s turnover and all of its sole-proprietorship enterprises. In addition to your business registration Singapore entity, there are zero-rated supplies and non-taxable supplies that fit under the categories of exempt supplies and out-of-scope supplies.
The benefits and drawbacks of voluntary GST registration
When registering for Voluntary Registration for GST, there are three things to keep in mind:
#1 A description of your suppliers
If the majority of your suppliers are GST-registered, they will charge you 7% GST on products and services sold to you. You cannot, however, claim the GST paid if you are not GST-registered. In this instance, a Voluntary Registration may make sense, allowing you to collect the GST paid. You should keep in mind, however, that as a GST-registered firm, you must now charge your clients GST as well.
#2 Customer demographics
If your consumers are not GST-registered, you will effectively raise your pricing since they will be unable to collect the GST paid. If you retain the same sales price (and absorb the GST) for them, your gross profit from each transaction will suffer.
#3 The nature of the sales
If you sell zero-rated items, such as exporting products or delivering services to foreign customers, you are not required to charge GST. In this case, becoming GST-registered may help you since you may collect GST on purchases, but you do not have to hike prices for your consumers.
How do company formation Singapore entities GST register?
All GST registration applications must be submitted online through the myTax Portal using your CorpPass and supporting papers. This implies that authorized personnel or third-party applicants can submit an application on behalf of the company formation Singapore process. Sole proprietors should utilize the myTax Portal as well.
Business registration Singapore experts seeking Voluntary Registration may need to take extra procedures, such as submitting your GIRO application and completing the two e-learning courses mentioned previously. Your application will be processed by IRAS within 10 working days. Additional information and supporting papers may be asked throughout this phase. Following that, you will be notified of the approval.
Your GIRO application form will then be forwarded to your bank for review. Approval might take two to four weeks. Accepted applications will be notified to you by your bank and not IRAS.
A letter will be issued to your registered address if your GST registration application is successful. The letter will include information such as your GST Registration number and the date of your GST registration’s effective date. This letter will be available on the myTax Portal as well. Once you’ve determined your GST registration’s effective date, you must begin charging GST on that day.
Today is the best time to start a business in Singapore
WLP Group advises entrepreneurs and international corporations on the best strategies for expanding in Singapore. To get a head start on forming a business in Singapore, read our suggestions on formation, employment permits, corporate compliance, and taxation. You may also get in touch with us to set up a consultation with one of our specialists.