Zero-Rated Tax Singapore: When Should You Charge?

Introduction

Goods and Services Tax (GST) in Singapore is a broad-based consumption tax levied on nearly all supplies of goods and services. As a business owner, understanding the intricacies of GST is crucial for compliance and financial planning. This includes understanding how to calculate GST on your taxable supplies and when zero-rate GST applies. Another important aspect is knowing when to charge zero rate GST in Singapore at the prevailing rate.

This blog aims to clarify what zero-rated GST Singapore entails and the conditions under which it applies. By mastering this, you can ensure your business remains compliant while maximising potential benefits.

What is Zero Rate GST?

In Singapore, most goods and services supplied are subject to a standard GST rate of 9%. However, zero-rated GST allows businesses to charge 0% GST on specific taxable supplies, including the import and local supply of goods made in Singapore. This is different from exempt GST, which applies to certain categories like residential property sales and financial services. Unlike zero-rated supplies, exempt supplies are not subject to GST at all, and businesses cannot claim Input Tax (GST paid on purchases) incurred for making exempt supplies.

Here are some examples of zero-rated supplies in Singapore:

1. Export of goods
2. International services
3. Sales of investment precious metals (IPM) to approved persons
4. Supplies made to approved marine customers

Scenarios When You Should Charge Zero Rate GST

Let’s delve deeper into the specific scenarios where you can leverage zero-rated GST:

Export of Goods

Exporting goods refers to the sale of physical products that leave Singapore for consumption or use in another country. To qualify for zero-rated GST on exported goods, you must meet the following conditions to ensure that your business remains complaint with the current GST regulations:

1. You must have a valid GST registration.
2. You must possess proper documentation, such as a customs declaration form (CP3), bill of lading, or air waybill, proving the goods have left Singapore.
3. The export must be made in the course of your business.

International Services

International services are services supplied or received outside Singapore. Examples include:

1. Consultancy services provided overseas
2. Transportation services like air or sea freight
3. Telecommunication services provided to non-residents

For your international services to be zero-rated, they must meet specific criteria:

1. The services must be entirely consumed outside Singapore.
2. You must have a valid contract with the overseas recipient.
3. You must have proper documentation, such as invoices clearly stating the services are supplied outside Singapore.

Sales of Investment Precious Metals (IPM)

Investment precious metals (IPM) are gold, silver, platinum, and palladium defined under the GST (Investment Precious Metals) Regulations. You can charge zero-rated GST on sales of IPM only if:

1. You are a licensed dealer under the Precious Stones and Precious Metals Act (PSPMA).
2. You sell the IPM to a GST-registered customer who is recognised as an approved person under the GST (Investment Precious Metals) Regulations.
3. You have the necessary supporting documents, such as a sales invoice and a copy of the customer’s GST registration certificate.

Approved Marine Customers

Approved marine customers are entities involved in operating or supplying goods for vessels used for international voyages. These can include shipping companies, airlines, and offshore rig operators.

When making zero-rated supplies to approved marine customers, you must ensure:

1. You have a valid contract with the approved marine customer.
2. The supplies are for use on a qualifying vessel in international voyages.
3. You possess the required documentation, such as delivery orders and certificates issued by the approved marine customer.

Documentation Requirements for Zero Rate GST

Proper documentation is vital to claim zero-rated GST on your supplies. The specific documents required vary depending on the scenario:

1. Export of Goods: Customs declaration form (CP3), bill of lading, or air waybill.
2. International Services: Contract with the overseas recipient and invoices clearly stating the services are supplied outside Singapore.
3. Sales of IPM: Sales invoice, copy of the customer’s GST registration certificate, and a copy of their Approved Person status confirmation from IRAS.
4. Supplies to Approved Marine Customers: Contract with the approved marine customer, delivery orders, and certificates issued by the approved marine customer.

Maintaining accurate and complete documentation ensures a smooth process when claiming input tax and avoids potential penalties for non-compliance.

Common Mistakes to Avoid

Here are some common mistakes businesses make regarding zero-rated GST:

1. Misinterpreting zero-rate GST scenarios: Not all exports or international services qualify for zero-rating. Ensure you understand the specific criteria before applying zero-rated GST.
2. Inadequate documentation: Missing or incomplete documentation can lead to the rejection of your zero-rated GST claims.
3. Failure to meet conditions for zero rating: Not fulfilling all the necessary conditions for a particular zero-rated GST scenario will disqualify you from claiming it.

How to Apply for Zero Rate GST

Applying for zero rate GST involves several steps. First, identify if your supplies qualify under the specified scenarios. Then, gather the necessary documentation to support your claim. Next, record these transactions accurately in your GST returns. Use the GST F5 form to report zero-rated supplies to the Inland Revenue Authority of Singapore (IRAS).

Here are some key considerations and tips for claiming zero-rated GST:

1. Maintain clear and detailed records: Keep invoices, contracts, and other relevant documents for at least seven years from the date of supply.
2. Stay updated on GST regulations: The Inland Revenue Authority of Singapore (IRAS) may revise regulations regarding zero-rated GST from time to time. Refer to their official website for the latest updates.
3. Seek professional advice: If you are unsure about the applicability of zero-rated GST to your specific situation, consider consulting a tax advisor or accountant specializing in GST.

Conclusion

Understanding when to charge zero rate GST in Singapore is vital for entrepreneurs and small business owners. Key scenarios include the export of goods, international services, sales of IPM, and supplies to approved marine customers. Proper documentation and avoiding common mistakes are essential for compliance. Applying for zero-rated GST involves identifying qualifying supplies, gathering documentation, and accurately reporting transactions.

By mastering these aspects, your business can benefit from tax efficiencies and avoid potential penalties. For further guidance on GST compliance, visit Grof’s comprehensive guide on GST for businesses in Singapore.

Need more information on GST in Singapore? Grof offers a comprehensive suite of resources to simplify GST management for your business. Visit our GST services page to learn more!

Don’t hesitate to contact Grof for any further assistance with your GST needs. Our team of experts can help you navigate the complexities of GST compliance and ensure you are maximizing your tax benefits.