With digital tax gaining momentum in many jurisdictions, it came as little surprise when the overseas vendor registration (OVR) regime was announced in Singapore’s 2018 budget. Echoing similar regimes worldwide, this so-called “Netflix tax” finally introduces GST on digital services sold to consumers in Singapore, beginning on 1 January 2020. Registration is available from 23 October 2019.
In addition to streaming subscriptions like Netflix, digital services include anything sold and delivered digitally, requiring minimal human intervention, where delivery would be impossible without information technology.
Taxable digital services include:
- Subscription-based media like magazines, online gaming and content streaming
- Data management services like webhosting and data warehousing
- Digitally enabled support services like listing fees and service charges, even for physical transactions
- Downloads like apps, e-books, media files and software executables
The new system is meant to level the playing field for local businesses facing heavy competition from overseas suppliers that are not taxable in Singapore. With GST chargeable across the border, brick-and-mortar businesses in Singapore will no longer be at a competitive disadvantage on account of extra tax liability.
What this means for businesses
From 1 January 2020 onwards, overseas suppliers will be required to register for, charge and account for GST on digital services sold to Singaporean consumers if they meet or exceed the revenue threshold. This is a global turnover exceeding S$1 million, together with digital sales to Singaporean consumers valued at over S$100,000.
This makes all major suppliers of digital services equally liable for GST, whether they are overseas vendors or homegrown. Where an electronic marketplace operator like the App Store or Google Play Store sells digital services on behalf of third-party suppliers, the tax burden could fall on the operator rather than the supplier, depending on factors like sale and delivery arrangements.
Next steps for overseas suppliers
If you are a supplier based outside Singapore with customers in Singapore, first determine whether your digital services fall within the regime, and whether you meet the revenue threshold. Even if you did not meet them in the last calendar year but are projected to do so within the next 12 months, you are required to prospectively register for GST.
The key to staying compliant lies in preparing ahead of time. Here is a handy checklist to help you get started.
- Consider the nature of your services
- Are they digital in nature?
- Can they be delivered without information technology?
- Summary – do they fall within the regime?
- Consider whether you meet the revenue criteria
- If you are projected to meet the revenue threshold in the next 12 months, when do you need to register by?
- GST does not apply if the consumer doesn’t belong in Singapore, or if the buyer is also a GST-registered business, so consider how you would determine your customer’s location and GST status
- Do your systems currently capture and retain this data?
- Do your suppliers collect data on your customers?
- Are your data collection and retention policies PDPA and GDPR compliant?
- Once you’ve assessed these questions, you can determine your registration liability
- Who will be responsible for overseas compliance?
- Impact assessments will establish what needs to be done
- Do you have the systems, personnel and IT resources you need?
- Do you need to review your pricing and margins to protect market share?
- Do your tax, finance and compliance staff need training on the OVR regime?
If you would like to discuss Singapore's overseas vendor registration, please contact our tax team.