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Singapore Announces Plans For GST Reforms

Friday, November 8, 2019

Singapore is to add provisions to draft legislation to enhance the new GST regime for imported services and clarify new rules for virtual currencies.

The changes were outlined by Lawrence Wong, Second Minister for Finance, during the second reading of the Goods and Services Tax (Amendment) Bill 2019.

The bill will implement previously announced reforms.

First, from January 1, 2020, GST will be applied on imported services in the context of business-to-business transactions.

Under the reverse charge mechanism, when a person who belongs outside Singapore and makes a business-to-business supply of services to a GST-registered person who belongs in Singapore, the GST-registered recipient will be required to account for GST on the value of the imported services as if they were the supplier, to the extent that the imported services fall within the scope of the reverse charge. The recipient would be allowed to claim the corresponding GST as their input tax, subject to the normal input tax recovery rules.

According to Wong, refinements are proposed to the Overseas Vendor Registration regime, to allow GST group registration for overseas suppliers. It will allow local electronic marketplace operators to account for GST on business-to-business and also business-to-consumer supplies of digital services on behalf of their underlying suppliers. It will also clarify the scope of the GST reverse charge, to ensure that it applies to all businesses that are GST-registered or liable for GST registration, and are not allowed to input tax claims in full.

In addition, another amendment would introduce offences for misrepresentation of information. Wong said the measure is required for the tax authority to enforce GST on imported services effectively.

Second, the Goods and Services Tax (Amendment) Bill 2019 would reform the GST treatment of digital payment tokens, otherwise known as cryptocurrencies.

Currently, the exchange of fiat currency and the provision of loans in fiat currency are treated as financial services and are exempt from GST. Cryptocurrency is not legal tender like fiat currency, but cryptocurrencies do serve as a medium of exchange in some transactions. Therefore, the legislation will exempt from GST the supply of digital payment tokens that are in exchange for fiat currency or other digital payment tokens, as well as the loan of digital payment tokens.

Wong explained that the legislation will ensure that there will be a no-supply for GST purposes where digital payment tokens are used as consideration, as payment for goods and services. This will mean that whether cryptocurrency or fiat currency are used to purchase goods and services, GST will be chargeable only on the supply of goods and services and not on the digital payment token itself, he said.

According to Wong, to safeguard the interests of taxpayers who lodge appeals to the GST Board of Review, new definitions are also to be introduced of "accountant" and "advocate and solicitor" within the bill, to ensure that representatives handling taxpayers' appeals to the Board meet certain professional qualifications. Wong said these definitions are consistent with those currently found in the Income Tax Act for the purposes of appeals heard before the Income Tax Board of Review.