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The reverse charge (“RC”) is one of the mechanisms frequently used to “level the playing field” in the GST treatment of services supplied by domestic and overseas suppliers. The Inland Revenue Authority of Singapore (“IRAS”) recently released their revised guidance in advance of the regime go-live date of 1 January 2020.
Without the RC, when a supplier that belongs outside Singapore makes a supply of services to a GST-registered business in Singapore (“B2B”), the supply would not be subject to GST, while the same supply of services provided by a domestic supplier would be subject to GST, thus creating an unlevel playing field in favour of oversea suppliers.
From 1 January 2020, the GST-registered recipient would be liable to account for GST (“output tax”) on the value of the imported services (with some exceptions) from overseas suppliers. At the same time, the GST-registered recipient would be entitled to claim the self-accounted output tax as input tax, subject to the usual partial exemption recovery rules.
The RC will largely affect two types of businesses in Singapore (irrelevant of their legal structure);
As always, the key to staying compliant lies in preparing ahead of time. Here is a handy checklist to help you get started.