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Singapore VAT News: GST Changes from January 2023

First of all, Happy New 2023 to our readers! We want to thank you for choosing 1stopVAT as your source of VAT-related know-how. And now, let’s jump into the news!

The Singaporean VAT equivalent – the Goods and Services Tax (GST) rate – was unchanged for fifteen years. However, since January this year, companies in Singapore have been facing a GST rate increase. The previous GST rate of 7% has been increased to 8%, and on 1 January 2024 will reach 9%.

This phased GST increase is aimed at collecting more funds for social services and healthcare in the country, which is currently facing the economic threats of the ageing society. Even though the increased tax percentage will support the local economy, Singapore’s GST rate will remain far below the Asian average, which is currently 12%.

Companies in Singapore are already applying the 8% GST rate starting from 1 January 2023. The country’s tax authorities have issued detailed information about seller obligations in light of this VAT increase.

Among the information provided by The Inland Revenue Authority of Singapore, in the transitional period, two factors are important when deciding which rate to apply. They are: the date when the payment is received from the client and the date when the buyer receives goods or services.

So, if a GST-registered business received the payment before 1 January 2023, 7% GST must be charged, and if the payment has arrived on 1 January 2023 or later, the percentage is 8%. However, some businesses might come across the situation when the invoice had been issued before the New Year, and the payment has arrived after 1 January. In such cases, companies are obliged to cancel the previous invoice by sending a credit note and issue a new one with the correct 8% GST rate.

Other situations that involve confusion with the changed GST rate are security deposits, situations when import permits were issued before 2023 and clearance was made after the New Year, and hotel stays that last both in periods of 7% and 8% GST rate. We recommend checking out The Inland Revenue Authority of Singapore webpage to learn more about the specific situations.

The general recommendation to sellers was to prepare for this transitional period by giving the customers a heads-up about the upcoming VAR increase and possible invoicing scenarios.

At the same time, all businesses selling goods and services that are subject to GST must now have corrected their prices to include the new GST rate of 8%. In cases when it was not possible to promptly change prices upon the New Year, the companies were allowed to display two prices.

Failing to comply with the tax authority’s requirements by submitting incorrect invoices, displaying incorrect prices, collecting increased GST rates prior to the beginning of the new period or charging GST with no GST registration might call for repercussions from the tax authorities, including penalties and other unfortunate consequences. If you are looking for partners that can help your company avoid non-compliance and simplify VAT or GST matters, you have come to the right place. Reach out, and our team at 1stopVAT will help your company grow by optimizing your tax reporting.