Following the 2 new GST changes to Overseas Vendor Registration (OVR) wef 1/1/2020 (What is Overseas Vendor Registration (OVR) and how does it matters to you as a customer or supplier ? dated 8 July 2021) and media sales (GST changes for advertising media sales dated 22 July 2021), the OVR will be extended to cover all B2C supplies of imported services. All services received remotely whether digital or non-digital will soon be subjected to GST wef 1/1/2023. The remote services will cover almost all online (non-physical) services except those services that fall within exempt supplies (Fourth Schedule of GST Act), qualified zero rating under s21(3) or services provided by a foreign government outside Singapore.
In essence, only specified services are excluded and almost all online services will now be subjected to GST, which will include professional services (eg corporate services, investment advisory, brokeage), technology driven services (eg Edtech, Regtech, telemedicine, telemarketing), educational, professional membership and examination services.
A 2 tier GST registration regime will apply to all suppliers (foreign or local) to ascertain OVR pay-regime registration. If you are a foreigner supplier (not based in Singapore) or an operator of an online marketplace, you will be subjected to GST registration under OVR if your global turnover and value of B2C (sales to non-GST registered customers) supplies of remote services and LVG (low value goods exceeds $1m and $100,000 respectively for either the last calendar year or for next 12 months.
If you are a foreign supplier based outside Singapore but is selling services to Singapore market
- You would need to ascertain whether you need to register for GST under OVR under the 2 tier GST regime. This test has to be performed periodically at least on a monthly basis on both the prospective (next 12 months) or retrospective (last calendar year).
If your global sales > $1m and local sales of remote services (+LVG to Singapore non-GST registered customers) > $100k, you would need to comply as a OVR registered person and apply for OVR within 30 days.
- You will need to ensure that your IT infrastructure can capture and identify 3 key information proxy – payment, residence and access proxy. In the determination of whether a customer belongs to Singapore, you would need to obtain a minimum of 2 non-conflicting proxy information: a payment poxy (eg credit card information based on BIN or bank account details) and either a residence proxy (eg billing or residence address) or a access proxy (eg mobile country code, IP address).
- If you need to ensure your billing and accounting systems are able to reflect the applicable 7% GST if you are OVR. You are not allowed to charge GST on GST registered customers.
If you are an online marketplace operator and is selling services to Singapore market
- You will be subjected to OVR if the transaction value through your marketplace exceed the 2 tier GST OVR regime and therefore similar to what apply above for foreign suppliers.
If you are not a supplier but is buying services from a foreign suppliers or marketplace
- You will need to be aware that your suppliers may now request additional information relating to payment, residence or access proxy.
- If you are GST registered, you need to ensure that you provide your GST registration upfront in advance to avoid being charged for GST. If you are not GST registered, you would need to be aware that going forward, your supplier will charge GST for services which may impact your profitability or cashflows.
- If you are GST registered and are being wrongly charged GST in your bill, you would need to seek the refund from your supplier. You are not allowed to claim the GST erroneously charged as part of your input tax claim.
It is important that you start to assess how the above may impact your business model, operations, billing, accounting systems or supply chain as a supplier, online marketplace operator or a customer for these services. It is not just regulatory compliance (eg penalty and enforcement on ono-compliance) on GST but more importantly, this will change the way that you run your business, source for your supplies and manage your customers or team.