Singapore’s upcoming 2023 GST scheme explained

Singapore, like many other countries across the globe such as the United Kingdom, Australia, and countries in the European Union, is changing the way they handle the collection of goods and services tax (GST) on low-value imports. Effective January 1, 2023, the import GST de minimis will essentially go away (going from $400 SGD to $0 SGD), which means GST will be owed on all goods, regardless of value. The duty de minimis, however, will not be changing.

This change is only applicable to retailers who meet the following thresholds:

• Retailers who sell, or expect to sell, more than $100k SGD (cost only, not CIF) into Singapore within a 12-month period, and

• Sell, or expect to sell, more than $1M SGD (CIF) globally.

Another significant change, also effective January 1, 2023, is that Singapore’s GST rate is increasing from 7% to 8%. Then in January 2024, it will increase from 8% to 9%. This increase applies to everyone, not just retailers who meet the above thresholds.

For low-value imports (where the total of the goods is valued at or less than $400 SGD), the affected retailers will have to either register for Singaporean GST or cease orders into Singapore. However, if you meet the threshold for registration, that means you have a pretty healthy sales volume in Singapore and should not want to lose that.

This blog will discuss the following:

• Who the new scheme will impact
• How to stay compliant
• The reason behind the change
• The consequences for noncompliance

Who does the Singapore GST scheme affect?

If your business sends low-value imports into Singapore in business-to-consumer (B2C) shipments, this change will impact you. Currently, low-value imports are free of GST and duty. However, effective January 1, 2023, these orders will incur GST. Here are two scenarios to put the change into perspective for retailers who meet the thresholds and their customers:

Before January 1, 2023:

• Alexander lives in Singapore with his wife, Lisa. On February 1, 2022, he orders her a personalized charm bracelet for Valentine’s Day, which he can only find on an online website in the United Kingdom. The bracelet costs $125 SGD. He is able to get this shipped to Singapore free of duty and tax.

On or after January 1, 2023:

• On January 27, 2023, Timothy, who lives in the United States, wants to send his friend in Singapore a U.S. souvenir. Timothy orders an NFL jersey that costs ~$210 SGD and has it shipped to his friend in Singapore. Although a low-value item, this jersey now incurs import GST but remains free of duty due to the low-value GST change.

How do I comply with the Singapore low-value GST scheme?

If you wish to continue selling low-value goods into Singapore beyond January 1, 2023, you must do the following:

If your business sells or is expected to sell products (low or high value) into Singapore exceeding S$100,00 annually and its global turnover exceeds or is expected to exceed S$1 million at the end of each calendar year, you must do the following:

1. Register for a Singaporean GST number through the Overseas Vendor Registration (OVR).
2. Set up your website to collect GST on low-value orders from Singapore-based customers at the time of purchase.  There are different methods for assessing  GST  under this law,  but we will publish a guide explaining them in detail.
   1. Zonos Landed Cost and International Checkout make this simple!
3. Remit the collected GST to the IRAS quarterly.

If you meet the requirements of registration but decide not to register, you can do either of the following:

• Cease low-value orders to Singapore.
• Get set up with Zonos Landed Cost Guarantee (LCG).
  • More information about how Zonos LCG will manage the Singapore GST regime will be available closer to January 2023.

Why the Singapore GST change?

The intention of this taxation on low-value goods into Singapore is an attempt to level the playing field between overseas retailers and local vendors. This change will make it so that both domestic and international shipments are taxed the same and that foreign retailers will not have an unfair tax exemption advantage over Singaporean vendors. In fact, this change may make Singaporeans even more inclined to shop locally since effective January 1, 2023, not only will low-value imports incur GST, but they will also incur international shipping costs.

What happens if I meet the registration requirements but don’t register for GST and continue sending low-value goods to Singapore?

Failure to register and pay GST is tax evasion if you meet the requirements for OVR GST registration. Singapore is committed to keeping the playing field even between sellers at home and abroad and has enacted legislation that allows IRAS to hold sellers liable for unpaid GST.

Next steps

1. EU VAT scheme – Learn about the new EU VAT scheme and how it affects your business.
2. UK VAT scheme – Learn how the recent changes in UK VAT will affect your business.

Resources

• IRAS – GST on low-value imports IRAS – GST on imports of low-value goods