Your company pays a monthly software fee to a supplier in another country. The invoice shows no Singapore GST. You might think no GST applies. Whether you owe GST on this payment depends on your own GST position, not on the supplier.
What the reverse charge does
Since 1 January 2020, a GST-registered business without full input tax credit accounts for GST on services bought from overseas suppliers. Since 1 January 2023, the same rule covers low-value goods. The rate is 9%, in force since 1 January 2024.
You declare the GST yourself, as if you had charged the tax yourself. The overseas supplier collects nothing from you.
Who owes the charge
A business making only taxable supplies recovers all of its input tax, so the reverse charge would net to nil. IRAS leaves these businesses out. The rule applies when you make exempt supplies too, such as residential rent or interest income, and you recover only part of your input tax.
Even then, a de minimis test gives relief. You skip the reverse charge when your exempt supplies do not exceed an average of S$40,000 a month and do not exceed 5% of your total supplies.
A worked example
Your company has total supplies of S$500,000 a month. Among them sits S$30,000 of residential rent, which is exempt. This is 6% of total supplies. The S$30,000 is under S$40,000, but 6% is above 5%, so you fail the de minimis test.
An overseas consultant bills you S$20,000. GST at 9% is S$1,800. You declare S$1,800 in your GST return. How much you recover afterwards depends on your mix of taxable and exempt supplies.
Now change one number. Suppose the rent is S$20,000 a month. This is 4% of total supplies and under S$40,000. You pass the test and owe no reverse charge on the same S$20,000 invoice.
Overseas vendor registration
A separate regime puts the duty on foreign sellers. An overseas supplier registers for Singapore GST when its global turnover exceeds S$1 million and its sales to Singapore consumers exceed S$100,000. Digital services have fallen under this regime since 1 January 2020. Non-digital services and low-value goods have fallen under the same regime since 1 January 2023.
Both thresholds look at sales to consumers, so the regime shapes what individuals pay. As a business buyer, you watch the reverse charge.
If you are not GST-registered
An unregistered business must register when such imports exceed S$1 million in 12 months.
What to do this quarter
– List every overseas invoice from the past 12 months. Bank and credit card statements show most of them.
– Work out your exempt supplies as a monthly average and as a share of total supplies.
– If you fail the de minimis test, add the 9% to each GST return. Returns fall due within 1 month after the accounting period ends.
– Keep the overseas invoices and your workings for 5 years.
Send your latest profit figure or your question by WhatsApp to +65 9876 3553 or by email to henry@cschow.com.sg.
Henry Chow
Public Accountant, C S Chow & Co