Zero-rating: GST @ 0% - Tax Academy · document as per the e-Tax guide “GST: ... Transport services provided by DHL to send goods from a ... of the GST Act allows for zero-rating

Zero-rating: GST @ 0%

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FASTAX

6 Jun 2017

Zero-rating

Zero-rating

Goods

Exports

Services

International Services

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• GST is chargeable at 0%

• No requirement to issue a tax invoice

• GST Act: Section 21(3)(a) to 21(3)(y)

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Can be grouped into a few broad categories.

For example:

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IndustrySection 21(3) of the GST Act

General e, f, g, i, j, k

Logistics (e.g. Freight Forwarder) a, b, c, d

Marine and Shipping l, m, n, o, p

Telecommunication q

Is the service directly in connection (DIC) with land or goods?

Yes – Tangible services DIC with land or goods

Land/ goods are located in Singapore

Standard-rate, unless Section

21(3)(g) applies

Land/ goods are located overseas

Land overseas -

Section 21(3)(e)

Goods overseas -

Section 21(3)(f)

No – Intangible services not DIC with land or goods

Is the service contractually supplied to an overseas

entity?

Yes

Section 21(3)(j)

Section 21(3)(k)

No

Section 21(3)(i)

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Directly in connection means:

1. Physical work done on the goods or land in a way thatchanges or affects the goods or land;

2. Physical contact or interaction with the goods or land butdoes not change the goods or land physically;

3. Establishing the physical attributes (such as quantity, size, orvalue) of the goods or land;

4. Affecting (or its purpose is to affect) or protecting the natureor value (including indemnity against loss) of goods or land; or

5. Affecting, or proposes to affect, the ownership of the goodsor land including any interest in or right over goods or land.

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S21(3)(e):

Services supplied directly in connection with landsituated outside Singapore

* Documents (i.e. invoice or contract) must specify thelocation of the property.

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S21(3)(e):

Examples:

1) A Singapore construction company is providingconstruction services to a Singapore propertydeveloper for a building in Vietnam.

2) Singapore real estate agent providing managementservices for a landed property in Australia.

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S21(3)(f):

Services supplied directly in connection with goodssituated outside Singapore when services areperformed

Example:

A workshop sends its technician to repair a machine inThailand. The workshop bills a Singapore customer forthe services.

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S21(3)(g):

Services supplied –

• Directly in connection with goods for export* outsideSingapore; and

• Supplied to a person who belongs in a country otherthan Singapore, at the time the services areperformed.

* Must have definite and immediate intention forexport.

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S21(3)(g):

• Satisfy the following requirements to establish definiteand immediate intention for export:

i. Obtain a written confirmation (e.g. contract, email)from overseas customer that goods will be exportedafter completion of services and the expected exportdate

ii. Within 60 days from service completion date: Ensuregoods are exported and obtain the required exportdocument as per the e-Tax guide “GST: Guide onExports”

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S21(3)(g):

Examples:

1) A company provides packaging services for goods to beexported outside Singapore and invoices its services to anoverseas customer. Zero-rated under S21(3)(g)

2) Under the instruction of its Singapore customer, acompany provides packaging services for goods to beexported outside Singapore:

Cannot zero-rate the supply of services underS21(3)(g) as the company is making a supply to aperson who belongs in Singapore.

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S21(3)(j):

Services (excluding media sales) supplied -

• under a contract with a person who belongs outsideSingapore; and

• directly benefit a person who belongs outsideSingapore and who is outside Singapore at the timeservices are performed; and

• not directly in connection with land or goods inSingapore [except goods for export].

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S21(3)(j):

Examples:

1) An IT consulting firm contracts with Malaysiacompany to develop an accounting software for aThailand company. zero-rated

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IT consulting firm

Malaysia company

Contractual parties Thailand

company

Develops accounting services


S21(3)(j):

Examples:

2) A broker sells SIA shares in SGX for a client inMalaysia and charges commission for his services.

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BrokerMalaysia

client

Helps to sell SIA

shares in SGX

Commission


S21(3)(j):

Examples:

3) Under the instruction of its overseas customer A, aSingapore company provides accounting services toA’s Singapore subsidiary and invoices A for theservices.

• The services cannot be zero-rated as the directbeneficiary is in Singapore.

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S21(3)(k):

Certain services supplied -

• under a contract with a person who belongs outsideSingapore (in his business capacity), and

• directly benefit a person who belongs outsideSingapore (in his business capacity).

• This person may be in Singapore at the time servicesare performed.

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S21(3)(k):

The prescribed services are:

a) Services of engineers, lawyers, accountants and other similarconsultancy services

b) Data processing and provision of information

Services listed under (a) and (b) are not directly in connection with land orgoods 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 tobe exported

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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 listedunder (i) and (ii)

* Services listed from (a) to (d) that make reference to goods forexport should have definite and immediate intention for export(refer to slide 11 for more information).

* This above list of prescribed services cannot include any servicesrelated to accommodation and entertainment.

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S21(3)(k):

Examples:

1) Consultancy services provided to overseas company,who has come to Singapore, to obtain advice on thefeasibility of conducting business in Singapore.

2) Training services provided to overseas company who hassent their staff to Singapore to attend the course.

3) Sample testing conducted in Singapore to determine thepurity of bunker oil stored in a barge in USA.

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Logistics Industry

S21(3)(a):

International transport of goods and passengers

Example:

Air ticket, freight / courier charges from Singapore tooverseas and vice-versa

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Logistics Industry

S21(3)(b):

Services comprising the transport of goods in Singapore aspart of the international transportation of goods

Example:

Transport services provided by DHL to send goods from alocal warehouse to Changi Airport and then out ofSingapore.

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Logistics Industry

S21(3)(c):

Insuring or the arranging of the insurance or the arrangingof transport of goods / passengers for internationaltransportation

Example:

Insurance premium charged for insuring the transportationof goods from Singapore to overseas or vice-versa.

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Telecommunications Industry

S21(3)(q):

Prescribed services comprising the provision of any meansof telecommunication transmission (except local) can bezero-rated

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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 telecommunicationservices.

• 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 internationaltelecommunication services at cost.

*A can zero-rate the supply of international telecommunicationsservices to B.

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Wrong

You can zero-rate all yoursupplies of servicesprovided to overseascustomer.

You must standard-rateall your supplies ofservices provided to localcustomer.

Correct

You can only zero-ratethe supply of services(provided to overseas orlocal customers) if it is aninternational service thatfalls within the provisionsof Section 21(3) of theGST Act.

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Quiz 1 of 10

You are a freight forwarder. You are required to providetransportation services to bring your customer’s goods fromMalaysia to his Jurong warehouse.

You can:

a) Zero-rate the whole transportation services.

b) Zero-rate transportation services up till Woodlandscheckpoint and charge 7% GST for transportation servicesfrom Woodlands checkpoint to Jurong Warehouse.

c) Standard-rate the whole transportation.

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Answer: (a)

You can zero-rate the whole transportation services underSection 21(3)(a) and Section 21(3)(b) of the GST Act.

Quiz 2 of 10

You are a freight forwarder. Your local subsidiary company is required toprovide transportation services to bring their customer’s (C) goods fromMalaysia to C’s Jurong warehouse. You assisted your local subsidiary totransport the goods from Woodlands checkpoint to Jurong. You will billthe local subsidiary for your transportation services.

You:

a) can zero-rate the transportation services from Woodlandscheckpoint to Jurong.

b) should standard-rate the transportation services from Woodlandscheckpoint to Jurong.

c) don’t do anything and wait for IRAS officer to do an audit.

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Answer: (b)

Charge 7% GST on the local transportation services provided as you didnot provide the international transportation of goods.

Quiz 3 of 10

You are an engineering firm. Your overseas customer requestedyou to provide testing and certification services for water pipeslocated in Thailand.

You can treat your supply as:

a) Standard-rated supply

b) Zero-rated supply

c) Out-of-scope supply

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Answer: (b)

Zero-rate under Section 21(3)(f) of the GST Act as the testing andcertification services are supplied directly in connection with thewater pipes located in Thailand (goods outside Singapore).

Quiz 4 of 10

You are an engineering firm. Your Singapore customer requestedyou to provide testing and certification services for water pipeslocated in Thailand.

You can treat your supply as:

a) Standard-rated supply

b) Zero-rated supply

c) Out-of-scope supply

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Answer: (b)

Zero-rate under Section 21(3)(f) of the GST Act as the testing andcertification services are supplied directly in connection with thewater pipes located in Thailand (goods outside Singapore). Thebelonging status of the customer is not a qualifying criterionunder Section 21(3)(f) of the GST Act.

Quiz 5 of 10

Singapore customer requested you to repair his equipment located inSingapore. After the repair, your Singapore customer requested you toexport the goods out of Singapore.

You can zero-rate your repair services.

a) True

b) False

c) Not sure

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Answer: (b)

The repair services are subject to 7% GST as the services are directly inconnection with goods located in Singapore which is provided to a localcustomer.Section 21(3)(g) of the GST Act allows for zero-rating of servicesdirectly in connection with goods for export outside Singapore which issupplied to a customer belonging outside Singapore.

Quiz 6 of 10

A lawyer assisted an overseas client to purchase shares inSingapore. The overseas client is not in Singapore at the time theservices are performed.

The service is:

a) Zero-rated

b) Standard-rated

c) Out-of-scope

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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

Quiz 7 of 10

A lawyer assisted an overseas client to purchase shares inSingapore. The shares are purchased under the name of his wifein Singapore.

The service is:

a) Zero-rated

b) Standard-rated

c) Out-of-scope

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Answer: (b)

Services directly benefit the wife who is in Singapore and hence,services are subject to 7% GST.

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 callsmade

d) Standard-rate the local calls made and zero-rate the overseas callsmade

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Answer: (d)

The supply of local calls is subject to 7% GST whereas the supply ofoverseas calls is zero-rated under Section 21(3)(q) of the GST Act.

Quiz 9 of 10

An auctioneer held an auction in Singapore for a property situatedin 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

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Answer: (b)

Section 21(3)(e) prescribes for zero-rating for services supplied directlyin connection with land or any improvement thereto (e.g. property)located outside Singapore.

Since property is located in Australia, the auctioning services can bezero-rated under Section 21(3)(e) of the GST Act.

Quiz 10 of 10

You provide market research services for an overseas company toconduct a survey on the medical services industry in the AsiaPacific region.

This can be zero-rated under:a) Section 21(3)(e)b) Section 21(3)(g)c) Section 21(3)(j)

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Answer: (c)

Services can be zero-rated under section 21(3)(j) of the GST Actas the supply is not directly in connection with any land orgoods.

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

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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 2017. 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

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