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Singapore: Tax authority updates GST guidance

Singapore: Tax authority updates GST guidance

The Inland Revenue Authority of Singapore issued an updated guide to clarify the terms “directly in connection with” and “directly benefit” with respect to the goods and services tax (GST).


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The terms “directly in connection with” and “directly benefit” have implications as to whether a transaction qualifies as an international transaction and, thus, is subject to a zero rate of GST. 

The new tax guide clarifies that the subject goods or land must exist at the time when the services are performed in order to be eligible for zero-rated treatment. For instance, the supply of a right to buy goods is regarded as “directly in connection with” the goods, but the granting of a right to a patent is not deemed to be “directly in connection with” the goods because the goods did not exist at the time when the patent is granted.  Conversely, if the goods already exist (for example, a recipe or trade secret to produce these goods), the granting of a right to the recipe or trade secret may be regarded as “directly in connection with” the goods.

The guide also clarifies that if the supply has a few types of service elements, the entire supply would be deemed “directly in connection with” the goods or land if the primary service element is regarded as “directly in connection with” the goods or land. The value of the supply can entirely be zero-rated or standard-rated, depending on the location of the goods or land.

Businesses are also required to examine the flow of services to determine who directly benefits from their services for purposes of determining zero-rating. Not all persons or entities that benefit from the services are regarded as direct beneficiaries—for instance, spin-off recipients are not.

KPMG observation

Businesses that have been zero-rating their supplies of services need to evaluate in light of the new guide whether the services, instead, need to be subject to the standard rate and thus may consider making a voluntary disclosure to avoid penalties due to the different GST treatment of their services.


Read a February 2018 report [PDF 803 KB] prepared by the KPMG member firm in Singapore

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