Singapore's tax system relies heavily on implementing the goods and services tax (GST). It is a value-added tax levied on most supplies of goods and services and imported goods. In recent years, with the rise of e-commerce and cross-border transactions, there has been a significant increase in the importation of low-value goods (LVG) into Singapore. Starting from 01 January 2023, Singapore has widened its GST coverage to include low-value imports to maintain a fair competition for domestic businesses and avoid revenue loss.
To understand the implications for businesses involved in cross-border transactions, this guide will explain the criteria for LVG, the
impact on businesses, GST registration requirements, and compliance measures.
Low-value goods, as defined by the Inland Revenue Authority of Singapore (IRAS), are goods that meet the following criteria:
The GST import relief threshold refers to the maximum value of goods that can be imported without incurring GST. Any goods exceeding this threshold will be subject to GST upon importation.
The extension of GST to imports of low-value goods affects various entities involved in the supply chain. The responsibility to account for GST on imported LVG lies with the GST-registered customer in Singapore, regardless of the supplier's GST registration status or origin.
If the customer is not GST-registered, the obligation to account for GST may fall on the supplier, transporters, or electronic marketplace operators, depending on the specific circumstances of the transaction.
GST registration is mandatory for overseas suppliers, transporters, and electronic marketplace operators if they meet certain thresholds. The retrospective basis requires a taxable turnover exceeding SGD 1 million in the past 12 months or an expected turnover exceeding SGD 1 million in the next 12 months. These thresholds also apply to overseas suppliers of business-to-consumer (B2C) products or services to non-registered GST customers with a turnover exceeding SGD 100,000.
Overseas vendors that are required to register for GST but fail to do so may face penalties and compliance measures similar to domestic GST-registered persons. Failure to register for mandatory GST can result in fines of up to SGD 5,000 and imprisonment for up to 6 months in default of payment.
Late tax payments may also incur penalties. A 5% penalty is imposed for late fees and an additional 2% penalty for every month the tax remains unpaid, up to 50% of the outstanding tax.
To avoid penalties and ensure compliance with GST regulations, overseas vendors must register for GST and fulfil their obligations.
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To navigate the GST requirements for imports of low-value goods in Singapore, overseas vendors should consider the following recommendations:
It is essential to identify whether the customer is GST-registered in Singapore, as this determines the party responsible for accounting for GST on the supply of low-value goods.
Analyze the business operations to determine if the overseas vendor is considered a direct supplier, electronic marketplace operator, or
redeliverer. This distinction is crucial, as it influences the entity responsible for GST on the supply of low-value goods.
Understand the concept of entry value, which is not the same as the import value. The entry value includes costs, insurance, freight value, customs duties, commission, and other incidental charges. For ease of compliance, businesses may use the import value to determine the entry value.
Instead of valuing each item separately, consider applying the GST entry value threshold on a per-consignment basis, particularly when goods are bundled in a single shipment. This approach can reduce administrative burdens associated with determining the entry value of individual items.
Familiarize yourself with transitional rules that may affect the application of GST on low-value goods. For example, even if an overseas supplier's invoice was issued before 01 January 2023, the goods are delivered, and payment is received on or after that date, GST may still apply based on the lower payment received or the value of the goods provided.
By following these recommendations, overseas vendors can ensure compliance with GST regulations and minimise the risk of penalties.
The extension of GST to imports of low-value goods in Singapore has significant implications for businesses involved in cross-border
transactions. It aims to create a level playing field for local businesses and prevent revenue loss. Understanding the criteria for
low-value goods, the impact on businesses, GST registration requirements, and compliance measures is crucial for overseas vendors operating
in Singapore. By adhering to the recommendations provided, businesses can effectively navigate the GST landscape and fulfil their
If you're seeking expert guidance or assistance with your GST and Tax-related needs in Singapore, don't hesitate to contact Precursor. Our dedicated team is here to help you navigate the complexities of taxation, ensuring your business remains compliant and successful. Contact us today to discuss how we can assist you in optimising your tax strategies and compliance efforts. Your financial success is our priority.
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