Last updated on May 18th, 2022 -
Learn about the upcoming Singapore de minimis and GST collection changes.
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 S$400 to S$0), which means GST will be owed on all goods, regardless of value. The duty de minimis, however, will not be changing.
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 is pretty straightforward, so this blog will focus mainly on the change affecting GST on low-value imports.
For low-value imports (where the total of the goods is valued at or less than S$400), online retailers will have to either register for Singaporean GST or handle GST the way they currently handle their taxable shipments into Singapore, depending on their annual sales into Singapore and global turnover. 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:
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 S$125. 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 ~S$210 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.
- Same example as above, but: Timothy orders two jerseys instead of one. Although each jersey is considered low value, the total of the goods in the order amounts to greater than S$400, is therefore considered a high-value order, and is subject to the usual high-value GST process.
How do I comply with the Singapore low-value GST scheme?
Here are your options for compliance with the low-value GST change.
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:
- Register for a Singaporean GST number through the Overseas Vendor Registration (OVR).
- Set up your website to collect GST on low-value orders from Singapore-based customers at the time of purchase.
- 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.
If your business does not sell nor is it expected to sell products into Singapore exceeding S$100,00 annually and its global turnover does not exceed nor is it expected to exceed S$1 million at the end of each calendar year, you must do the following:
Handle GST the way you normally handle it for your taxable shipments into Singapore:
- If you ship your orders with duties, taxes, and fees prepaid, continue to do this; but remember to also collect tax on low-value orders.
- If you ship your orders without the prepayment of duties, taxes, and fees, it may be a good idea to alert your Singaporean consumers that low-value orders will be taxable as of Singapore 2023 so that they are not shocked with the tax invoice upon delivery.
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.
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