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Note: You may download the summary table, as well
as other relevant documents here.
| 1 |
Allowing insurers input tax claims based on the
tax fraction of cash payments paid to qualifying
policyholders under insurance contracts that are
subject to GST |
Presently, insurers are not eligible for any
input tax claims when they make cash payments to
policyholders in the fulfillment of their obligations
under insurance contracts because such payments
are not treated as supplies under our existing
law.
Following the Budget 06 announcement, insurers
would be allowed input tax claims based on the
tax fraction of these payments paid under contracts
that are subject to GST if they are made to:
(i) non-GST registered policyholders;
(ii) GST registered policyholders who are disallowed
by GST Regulations 26 and 27 from claiming the
input tax incurred on the premiums of (a) medical
and accident insurance, and (b) passenger car insurance;
and
(iii) GST registered sole-proprietors who buy insurance
policies in their private capacity.
This is to capture the true value-added of insurance
services which is conceptually not the entire value
of premium received, but the difference between
the gross premiums received and the claims met
by the insurers under the insurance contracts.
The change will be applicable to insurance policies
that start on or after 1 Jan 2007.
Details of the tax change can be found in the draft tax guide which will be made available at IRAS’ website (www.iras.gov.sg) shortly after the commencement of the consultation exercise.
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Section 29
Clause 5 |
Clause 5 repeals and re-enacts section 29 to
empower the Minister to make regulations for input
tax to be deemed to be incurred on any cash payment
made by an insurer upon an occurrence of an insured
event in certain circumstances, and for various
matters relating thereto. |
| 2 |
Aligning the GST treatment of Islamic financing
arrangements with the GST treatment of conventional
financing arrangements that they are economically
equivalent to |
The new GST treatment for an Islamic financing
arrangement entered into for the purchase of non-residential
property allows for any mark-up on the selling
price of the non-residential property by the bank
to the buyer to be exempt from GST, and the bank
will be allowed to claim GST in full on the purchase
of the non-residential property from the vendor.
This will ensure that the tax treatment of Islamic
financing arrangements is aligned with the treatment
of conventional financing arrangements that they
are economically equivalent to.
These amendments affect the GST treatment of qualifying
Islamic financial arrangements that is entered
into between a financial institution and a purchaser
on or after 17 February 2006. |
Fourth Schedule
Clause 10 |
Clause 10 amends the Fourth Schedule to include
the provision of financing by a financial institution
in connection with a qualifying Islamic financial
arrangement in relation to non-residential property,
for which the financial institution derives an
effective return, as an exempt supply of financial
services. |
| 3 |
Zero-rating tools used in manufacturing of goods
substantially for export supplied to overseas persons |
Presently, manufacturers are required to charge
GST on tools (e.g. moulds) supplied to overseas
customers if they are used in Singapore to manufacture
goods for export. The local manufacturers usually
absorb this GST as their overseas customers are
often non-GST registered persons who are unable
to claim the tax charged separately on the tools.
This has adversely affected the cost competitiveness
of local manufacturers.
The tax change as announced in Budget 06 recognises
that these tools are business inputs of overseas
persons and do not constitute private end consumption
per se, which is what a consumption tax regime
like GST seeks to tax. Thus, it is decided that
the supply of a tool, including the development
of its prototypes as well as any services rendered
in relation to a tool (such as modification and
repair), by any GST-registered person to an overseas
customer can be zero-rated, subject to certain
conditions to be prescribed.
This change was announced in Budget 06 as taking effect from 1 April 2006. The change is currently being effected, and will continue to be effected, by way of remission until the amendment for the change takes effect. |
New Section 21A
Clause 3 & 4 |
Clause 3 makes a consequential amendment to section
21(1) pursuant to the new section 21A inserted
by clause 4.
Clause 4 inserts a new section 21A to provide for
matters relating to the zero-rating of the supply
by a taxable person of any prescribed tool, the
supply of services directly in connection with
such tool and the supply of a prototype of such
tool to a person who belongs in a country outside
Singapore, where such tool is used in Singapore
for the manufacture of goods for the person who
belongs in a country outside Singapore. |
| 4 |
Revising the record-keeping period from the current
7 years to 5 years. |
Currently, the GST Act requires all GST registered
persons to keep business records for at least 7
years. As announced in Budget 2006, the record
keeping requirement in the GST Act will be shortened
to 5 years, as measured from the end of the prescribed
accounting period to which the record relates.
This 5-year period will apply to prescribed accounting
periods ending on or after 1st January 2007. |
Section 46
Clause 7 |
Clause 7 deletes and substitutes subsection (2)
of section 46 to reduce the period during which
records are to be kept in respect of prescribed
accounting periods ending on or after 1st January
2007 from 7 years to 5 years, and to clarify that
periods for which records are to be kept are to
be reckoned from the end of the prescribed accounting
period to which the records relate. |
Note: You may download the summary table, as well as
other relevant documents here.
| 1 |
Implementing an Advance Ruling System for GST |
To provide greater clarity and certainty to taxpayers,
an Advance Ruling System (“ARS”) will be provided
in the GST Act with effect from 1 January 2007.
A formal ARS would enable taxpayers to obtain legally
binding rulings so long as their requests fulfil
a clear set of procedures. It will also make clear
the circumstances under which the Comptroller has
to provide rulings requested by taxpayers as well
as the legal consequences of the rulings issued. |
New Section 90A & Fifth Schedule
Clause 9 and 11 |
Clause 9 inserts a new section 90A to enable
the Comptroller to make advance rulings on matters
specified in Part I of the Fifth Schedule (inserted
by clause 11), and for various matters relating
thereto.
Clause 11 inserts a new Fifth Schedule to provide
for various matters relating to advance rulings
pursuant to the new section 90A (inserted by clause
9). |
| 2 |
Implementing revised GST rules for zero-rating
of advertising services |
The existing GST rules to standard-rate or zero-rate
the supplies of advertising services are tied to
the advertised subject. The advertising service
can be zero-rated only if the advertised land or
goods are situated outside Singapore. If the advertised
subject is services, the advertising service can
be zero-rated only if it is supplied contractually
to an overseas person and for the benefit of overseas
person/s, and the services are not supplied in
connection with land or goods situated in Singapore
at the time the services are performed.
Given the new business models in the advertising
industry, IRAS and MOF have reviewed the GST rules
to make it simpler to determine when a supply of
advertisement may be zero-rated.
For advertising services, including any incidental
services, that specifically relate to the sale
of media space or airtime to promulgate the advertisements
in hardcopy or digital forms (e.g. TV, radio, internet,
handphone), the place of circulation of the advertisement
is the determining factor to standard-rate or zero-rate
this service.
Where the circulation of the advertisement is in
Singapore, the sale of media space or airtime is
a standard-rated supply attracting GST. Where the
circulation of the advertisement is wholly or substantially
outside Singapore, the sale of media space or airtime
qualifies for zero-rating under the new section
21(3)(u). The new treatment will take effect for supplies
made on or after 1 Jan 2007.
Details of the tax change can be found in the draft tax guide which will be made available at IRAS’ website (www.iras.gov.sg) shortly after the commencement of the consultation exercise. |
Section 21(3)
Clause 3 |
Clause 3 further —
(a) amends section 21(3) to insert a new paragraph
(u) to allow for the zero-rating of services comprising
the supply of a right to promulgate an advertisement,
and the promulgation of an advertisement, by any
means of communication in certain circumstances;
(b) deletes and substitutes a new paragraph (j)
in section 21(3) to make a consequential amendment
thereto following the new section 21(3)(u); and
(c) inserts a new subsection (4B) in section 21
to clarify that nothing in section 21(3)(u) is
to apply to services comprising only of the promulgation
of an advertisement by a means of telecommunication
specified in that subsection, as the zero-rating
of the provision of such means of telecommunication
is to be dealt with in accordance with section
21(3)(q). |
| 3 |
Revising the “subsequent specified period” under
Section 19(15) |
Presently, a taxable person who has failed to
pay his supplier but has nonetheless claimed input
tax is required to repay the input tax to the Comptroller.
Should he subsequently pay his supplier during
a “subsequent specified period”, he may re-claim
the input tax. Section 19(15) defines the “subsequent
specified period” to be a period “commencing on
the day immediately following the end of the initial
specified period, and ending on a day 6 years from
the end of the prescribed accounting period during
which the relevant input tax was first credited”.
In line with the reduction in record-keeping period,
we will amend the Act to reduce the “subsequent
specified period” from 6 to 5 years. This amendment
will be effective for input tax credits relating
to prescribed accounting periods ending on or after
1 Jan 2007. |
Section 19
Clause 2 |
Clause 2 amends section 19(15) by deleting and
substituting the definition of “subsequent specified
period” to change the period referred to therein
from 6 years to 5 years in respect of input tax
credited in prescribed accounting periods ending
on or after 1st January 2007. |
| 4 |
Revising the time limit for tax assessments by
the Comptroller |
Under the GST Act, the Comptroller may raise
tax assessments where a person has failed to make
the required GST returns or has made incorrect
returns. The assessments must be made not more
than 7 years after the end of the prescribed accounting
period. Given that we are revising the record-keeping
period to 5 years, Section 45 will be amended such
that assessments must be made within 5 years instead
of 7 years for prescribed accounting periods ending
on or after 1 Jan 2007. |
Section 45
Clause 6 |
Clause 6 amends section 45 by deleting and substituting
subsection (5) to change the period of time during
which an assessment may be raised by the Comptroller
from 7 years to 5 years in respect of prescribed
accounting periods ending on or after 1st January
2007. |
| 5 |
Providing a time limit for Comptroller to accept
returns that are filed late for the purpose of
revising assessments that have been made by the
Comptroller |
Currently, the GST Act does not impose a specific
time limit for a taxable person to file his returns
after the filing deadline (the filing deadline
is 1 month from the end of the prescribed accounting
period) where assessment has been made by the Comptroller.
To provide for finality in obligations and claims
for returns that are filed late, the Act will be
amended to stipulate a 5-year time limit for Comptroller
to accept such returns for the purpose of revising
an assessment that has been made. This amendment
will be effective for returns pertaining to prescribed
accounting periods ending on or after 1 Jan 2007. |
Section 45
Clause 6 |
Clause 6 also amends section 45:
(a) by inserting a new subsection (10A) to give
the Comptroller discretion to take into account
a return filed by a person after the Comptroller
has raised an assessment of tax due from that person,
and to revise the assessment previously raised
by the Comptroller; and
(b) by inserting a new subsection (10B) to provide
that any return made by a person after the relevant
period specified in that subsection will be disregarded
for the purpose of subsection (10A). |
| 6 |
Revising the time limit for claiming refunds
for tax overpaid or erroneously paid, and providing
a time limit for claiming refunds relating to over-declaration
of output tax for repayable returns, and under-claiming
of input tax |
Currently, the GST Act provides that a claim
for GST refund relating to tax overpaid or erroneously
paid must be made within 6 years of payment. Section
90 will be amended to revise the time limit to
5 years from the prescribed accounting periods
ending on or after 1 Jan 2007, in respect of which
the over-payment or erroneous payment arise. This
is consistent with the reference point for the
revised time limit relating to record-keeping and
raising assessments.
Further, Section 90 will be amended to introduce
a 5-year time limit for claiming refunds relating
to over-declaration of output tax for repayable
returns, and under-claiming of input tax. The Comptroller
currently subjects these claims to a time limit
by virtue of his discretionary powers in the GST
Regulations, and to ensure clarity to taxpayers,
the GST Act will be amended to prescribe a 5-year
time limit from the prescribed accounting periods
ending on or after 1 Jan 2007, in respect of which
the over-declaration of output tax or under-claiming
of input tax arises. |
Section 90
Clause 8 |
Clause 8 amends section 90 by inserting new subsections
(1A) to (1C) —
(a) to extend the power of the Comptroller to making
payments in respect of claims that any money is
due to a claimant under the Act in certain circumstances;
and
(b) to impose a time limit of 5 years for the making
of claims under the new subsection (1A) instead
of the current 6-year limit.
The clause further makes a consequential amendment
to section 90(1) following the insertion of the
new subsections (1A), (1B) and (1C). |
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