Zero-rating: 0% FASTAX 6 Jun 2017

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Owen Crawford
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1 Zero-rating: 0% FASTAX 6 Jun

2 Zero-rating Zero-rating Goods Services Exports International Services 2

3 GST is chargeable at 0% No requirement to issue a tax invoice GST Act: Section 21(3)(a) to 21(3)(y) 3

4 Can be grouped into a few broad categories. For example: Industry General Logistics (e.g. Freight Forwarder) Marine and Shipping Telecommunication Section 21(3) of the GST Act e, f, g, i, j, k a, b, c, d l, m, n, o, p q 4

5 Is the service directly in connection (DIC) with land or goods? Yes Tangible services DIC with land or goods No Intangible services not DIC with land or goods Land/ goods are located overseas Land/ goods are located in Singapore Is the service contractually supplied to an overseas entity? Land overseas - Section 21(3)(e) Goods overseas - Section 21(3)(f) Standard-rate, unless Section 21(3)(g) applies Yes No Section 21(3)(j) Section 21(3)(k) Section 21(3)(i) 5

6 Directly in connection means: 1. Physical work done on the goods or land in a way that changes or affects the goods or land; 2. Physical contact or interaction with the goods or land but does not change the goods or land physically; 3. Establishing the physical attributes (such as quantity, size, or value) of the goods or land; 4. Affecting (or its purpose is to affect) or protecting the nature or value (including indemnity against loss) of goods or land; or 5. Affecting, or proposes to affect, the ownership of the goods or land including any interest in or right over goods or land. 6

7 S21(3)(e): Services supplied directly in connection with land situated outside Singapore * Documents (i.e. invoice or contract) must specify the location of the property. 7

8 S21(3)(e): Examples: 1) A Singapore construction company is providing construction services to a Singapore property developer for a building in Vietnam. 2) Singapore real estate agent providing management services for a landed property in Australia. 8

9 S21(3)(f): Services supplied directly in connection with goods situated outside Singapore when services are performed Example: A workshop sends its technician to repair a machine in Thailand. The workshop bills a Singapore customer for the services. 9

10 S21(3)(g): Services supplied Directly in connection with goods for export* outside Singapore; and Supplied to a person who belongs in a country other than Singapore, at the time the services are performed. * Must have definite and immediate intention for export. 10

11 S21(3)(g): Satisfy the following requirements to establish definite and immediate intention for export: i. Obtain a written confirmation (e.g. contract, ) from overseas customer that goods will be exported after completion of services and the expected export date ii. Within 60 days from service completion date: Ensure goods are exported and obtain the required export document as per the e-tax guide GST: Guide on Exports 11

12 S21(3)(g): Examples: 1) A company provides packaging services for goods to be exported outside Singapore and invoices its services to an overseas customer. Zero-rated under S21(3)(g) 2) Under the instruction of its Singapore customer, a company provides packaging services for goods to be exported outside Singapore: Cannot zero-rate the supply of services under S21(3)(g) as the company is making a supply to a person who belongs in Singapore. 12

13 S21(3)(j): Services (excluding media sales) supplied - under a contract with a person who belongs outside Singapore; and directly benefit a person who belongs outside Singapore and who is outside Singapore at the time services are performed; and not directly in connection with land or goods in Singapore [except goods for export]. 13

14 S21(3)(j): Examples: 1) An IT consulting firm contracts with Malaysia company to develop an accounting software for a Thailand company. zero-rated Develops accounting services IT consulting firm Contractual parties Malaysia company Thailand company 14

15 S21(3)(j): Examples: 2) A broker sells SIA shares in SGX for a client in Malaysia and charges commission for his services. Broker Helps to sell SIA shares in SGX Commission Malaysia client 15

16 S21(3)(j): Examples: 3) Under the instruction of its overseas customer A, a Singapore company provides accounting services to A s Singapore subsidiary and invoices A for the services. The services cannot be zero-rated as the direct beneficiary is in Singapore. 16

17 S21(3)(k): Certain services supplied - under a contract with a person who belongs outside Singapore (in his business capacity), and directly benefit a person who belongs outside Singapore (in his business capacity). This person may be in Singapore at the time services are performed. 17

18 S21(3)(k): The prescribed services are: a) Services of engineers, lawyers, accountants and other similar consultancy services b) Data processing and provision of information Services listed under (a) and (b) are not directly in connection with land or goods situated inside Singapore [except goods for export] c) The testing of a sample of goods taken from or forming part of: i. goods situated outside Singapore when services are performed ii. goods for export outside Singapore d) The handling, storage or transport of goods, for goods imported or to be exported 18

19 S21(3)(k): The prescribed services are: e) Services of any of the following descriptions: i. training or retraining for any business or employment; ii. exhibition or convention services; or iii. services ancillary to, including organising the services listed under (i) and (ii) * Services listed from (a) to (d) that make reference to goods for export should have definite and immediate intention for export (refer to slide 11 for more information). * This above list of prescribed services cannot include any services related to accommodation and entertainment. 19

20 S21(3)(k): Examples: 1) Consultancy services provided to overseas company, who has come to Singapore, to obtain advice on the feasibility of conducting business in Singapore. 2) Training services provided to overseas company who has sent their staff to Singapore to attend the course. 3) Sample testing conducted in Singapore to determine the purity of bunker oil stored in a barge in USA. 20

21 Logistics Industry S21(3)(a): International transport of goods and passengers Example: Air ticket, freight / courier charges from Singapore to overseas and vice-versa 21

22 Logistics Industry S21(3)(b): Services comprising the transport of goods in Singapore as part of the international transportation of goods Example: Transport services provided by DHL to send goods from a local warehouse to Changi Airport and then out of Singapore. 22

23 Logistics Industry S21(3)(c): Insuring or the arranging of the insurance or the arranging of transport of goods / passengers for international transportation Example: Insurance premium charged for insuring the transportation of goods from Singapore to overseas or vice-versa. 23

24 Telecommunications Industry S21(3)(q): Prescribed services comprising the provision of any means of telecommunication transmission (except local) can be zero-rated 24

Both A and B made IDD calls via SingTel. SingTel bills A for the IDD calls made.

25 Telecommunications Industry S21(3)(q): Example: Onward supply of international telecommunication services: A and B share the same office premise in Singapore. A is the sole subscriber to SingTel for telecommunication services. Both A and B made IDD calls via SingTel. SingTel bills A for the IDD calls made. A in turn bills B for B s share of the international telecommunication services at cost. *A can zero-rate the supply of international telecommunications services to B. 25

26 Wrong You can zero-rate all your supplies of services provided to overseas customer. You must standard-rate all your supplies of services provided to local customer. Correct You can only zero-rate the supply of services (provided to overseas or local customers) if it is an international service that falls within the provisions of Section 21(3) of the GST Act. 26

27 Quiz 1 of 10 You are a freight forwarder. You are required to provide transportation services to bring your customer s goods from Malaysia to his Jurong warehouse. You can: a) Zero-rate the whole transportation services. b) Zero-rate transportation services up till Woodlands checkpoint and charge 7% GST for transportation services from Woodlands checkpoint to Jurong Warehouse. c) Standard-rate the whole transportation. Answer: (a) You can zero-rate the whole transportation services under Section 21(3)(a) and Section 21(3)(b) of the GST Act. 27

28 Quiz 2 of 10 You are a freight forwarder. Your local subsidiary company is required to provide transportation services to bring their customer s (C) goods from Malaysia to C s Jurong warehouse. You assisted your local subsidiary to transport the goods from Woodlands checkpoint to Jurong. You will bill the local subsidiary for your transportation services. You: a) can zero-rate the transportation checkpoint to Jurong. services from Woodlands b) should standard-rate the transportation services from Woodlands checkpoint to Jurong. c) don t do anything and wait for IRAS officer to do an audit. Answer: (b) Charge 7% GST on the local transportation services provided as you did not provide the international transportation of goods. 28

29 Quiz 3 of 10 You are an engineering firm. Your overseas customer requested you to provide testing and certification services for water pipes located in Thailand. You can treat your supply as: a) Standard-rated supply b) Zero-rated supply c) Out-of-scope supply Answer: (b) Zero-rate under Section 21(3)(f) of the GST Act as the testing and certification services are supplied directly in connection with the water pipes located in Thailand (goods outside Singapore). 29

30 Quiz 4 of 10 You are an engineering firm. Your Singapore customer requested you to provide testing and certification services for water pipes located in Thailand. You can treat your supply as: a) Standard-rated supply b) Zero-rated supply c) Out-of-scope supply Answer: (b) Zero-rate under Section 21(3)(f) of the GST Act as the testing and certification services are supplied directly in connection with the water pipes located in Thailand (goods outside Singapore). The belonging status of the customer is not a qualifying criterion under Section 21(3)(f) of the GST Act. 30

31 Quiz 5 of 10 Singapore customer requested you to repair his equipment located in Singapore. After the repair, your Singapore customer requested you to export the goods out of Singapore. You can zero-rate your repair services. a) True b) False c) Not sure Answer: (b) The repair services are subject to 7% GST as the services are directly in connection with goods located in Singapore which is provided to a local customer. Section 21(3)(g) of the GST Act allows for zero-rating of services directly in connection with goods for export outside Singapore which is supplied to a customer belonging outside Singapore. 31

32 Quiz 6 of 10 A lawyer assisted an overseas client to purchase shares in Singapore. The overseas client is not in Singapore at the time the services are performed. The service is: a) Zero-rated b) Standard-rated c) Out-of-scope Answer: (a) Zero-rate under Section 21(3)(j) of the GST Act as services are: Contracted with an overseas client Directly benefit the overseas client who is not in Singapore at the time services are performed Not directly in connection with land/ goods located in Singapore No media sales 32

33 Quiz 7 of 10 A lawyer assisted an overseas client to purchase shares in Singapore. The shares are purchased under the name of his wife in Singapore. The service is: a) Zero-rated b) Standard-rated c) Out-of-scope Answer: (b) Services directly benefit the wife who is in Singapore and hence, services are subject to 7% GST. 33

34 Quiz 8 of 10 Your related company uses your phone to make local and overseas calls. The correct GST treatment when you bill your related company is: a) Standard-rate the whole phone bill b) Zero-rate the whole phone bill c) Standard-rate the overseas calls made and zero-rate the local calls made d) Standard-rate the local calls made and zero-rate the overseas calls made Answer: (d) The supply of local calls is subject to 7% GST whereas the supply of overseas calls is zero-rated under Section 21(3)(q) of the GST Act. 34

35 Quiz 9 of 10 An auctioneer held an auction in Singapore for a property situated in Australia. The correct GST treatment is to: a) Zero-rate under Section 21(3)(a) b) Zero-rate under Section 21(3)(e) c) Zero-rate under Section 21(3)(f) d) Standard-rate Answer: (b) Section 21(3)(e) prescribes for zero-rating for services supplied directly in connection with land or any improvement thereto (e.g. property) located outside Singapore. Since property is located in Australia, the auctioning services can be zero-rated under Section 21(3)(e) of the GST Act. 35

36 Quiz 10 of 10 You provide market research services for an overseas company to conduct a survey on the medical services industry in the Asia Pacific region. This can be zero-rated under: a) Section 21(3)(e) b) Section 21(3)(g) c) Section 21(3)(j) Answer: (c) Services can be zero-rated under section 21(3)(j) of the GST Act as the supply is not directly in connection with any land or goods. 36

37 Useful e-tax Guides / Webpage e-tax Guides GST: Guide on Exports GST: Clarification on Directly in Connection With and Directly Benefit GST Guide for the Logistics Service Industry Webpage Providing International Services 37

END =) Disclaimer: This information aims to provide a better general understanding of IRAS practices and is not intended to comprehensively address all possible tax issues that may arise.

38 END =) Disclaimer: This information aims to provide a better general understanding of IRAS practices and is not intended to comprehensively address all possible tax issues that may arise. This information is correct as at 16 May While every effort has been made to ensure that this information is consistent with existing law and practice, should there be any changes, IRAS reserves the right to vary our position accordingly. 38

Public Revenue Department. Importers and Exporters

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