The Overseas Vendor Registration (OVR) regime was implemented on 1 January 2020 to level the playing field pertaining to Goods and Service Tax (GST) when items are procured overseas or locally. Initially, the regime applied to digital services, where the supply is automated, which means the flow of materials cannot take place without the presence of information technology. Some examples of this include downloads of e-books and audio books.
With effect from 1 January 2023, the OVR will be extended to imports of low-value goods or LVG of non-digital remote services sold to customers in Singapore via air or post. This means overseas businesses selling goods and services to Singaporean consumers remotely – that is via online platforms like websites and marketplaces – must charge GST on their low-value items if they are valued at S$400 and below. Overseas electronic marketplaces making goods available to local businesses and consumers will be also required to charge GST on the sale of low-value goods – instead of their own direct suppliers – if they are required to register for GST. Low-value goods do not include documents as well as liquor and tobacco products.
These new GST regulations implemented by the Inland Revenue Authority of Singapore (IRAS) are necessary to protect GST-charging local vendors who previously competed with overseas suppliers who did not include GST in their low-value shipments.
Below, we discuss the new regulations, and how they impact overseas suppliers and local customers importing goods into Singapore.
IRAS regulations for new GST treatment under Overseas Vendor Registration
1. Registering for GST in Singapore under the OVR
If you’re an overseas vendor (business or marketplace equivalent) looking to export goods to customers in Singapore, IRAS requires you to register for GST in Singapore if:
Your annual also turnover exceeds S$1 million; and
Your B2C supplies of remote services shipped to Singapore exceeds S$100,000
2. Charging of GST on all imported low-value goods
Upon registering for GST as an overseas vendor, you are required to charge local businesses and individual consumers GST on all low-value goods imported into the country via air or post as long as they are valued at S$400 and below.
Example:
Mr Loh purchases a set of wireless headphones for S$300 from an overseas supplier and has it delivered to him via air. Before 1 January 2023, he would not need to pay GST since it was a low-value good. However, with effect from 1 January 2023, the overseas supplier will need to register for GST as per rules stated above, and therefore, will charge GST on the importation of the headphones.
Considering shipping and administrative fees to be S$15, the final cost Mr Loh will have to pay is: S$300 + (S$300 x 8%*) + S$15 = S$339.
* This is based on new GST rate to be implemented in Singapore from 1 January 2023.
3. Performing reverse charge (RC) on B2B import of low-value goods
Whether the overseas supplier is GST registered or not, businesses in Singapore will need to perform reverse charge on all low-value goods imported into the country from the vendor. This means they will need to account for GST on these goods as if they were the supplier and claim GST as their input tax. Businesses will only be subject to reverse charge if they are not entitled to claim input tax in full and/or procure supplies from overseas vendors and import low-value goods worth more than S$1 million within a 12-month period.
What to do if you are an OVR supplier shipping to a Singaporean buyer?
1. Inform your DHL Express account manager
If you are a supplier under the new Overseas Vendor Registration regime, you will need to inform your DHL Express account manager. This way, they will be able to look out for your commercial invoices and ensure all requirements and necessary documentation is fulfilled.
2. Provide clear details of your GST registration details
You must ensure that you commercial invoice includes two key data:
Your GST registration number issued by IRAS after you applied for the OVR scheme
Indication of GST payment or non-payment for each item, accompanied by their values at the point of sale
Please note that point of sale implies that the GST is payable to the supplier. This means no GST will be payable to Singapore Customs. In contrast, shipments valued more than S$400 from any supplier regardless of whether they are GST registered or not will not need to charge GST at the point of sale. In such situations, GST will be payable to Singapore Customs via the courier service provider. Suppliers who do not need to register for GST will not need to charge GST at the point of sale nor pay GST to Singapore Customs for shipments S$400 and below.
Alongside your GST registration and payment details, ensure that other essential information such as the Harmonised System (HS) codes and country of origin are stated as well.
You will be required to provide this information to us via our Electronic Shipping Tool when your shipment is picked up from your premises. Our team will then include and declare this information electronically to Singapore Customs when the shipment arrives. You can indicate your OVR GST Number and GST Paid Flag via the MyDHL application programming interface (API). Reach out to your account manager should you need help connecting with your Electronic Shipping Tool.
3. Declare a customs non-payment permit
Since you will not need to make any payments at customs, you must declare a customs non-payment permit to allow your goods to enter Singapore.
4. Keep shipments of LVG and non-LVG separate
To ease import clearance procedures and speed up the processing of your shipment at customs, you are recommended to create separate commercial invoices for shipments containing low-value goods and those that don’t.
For example, suppose you have two items in your shipment, one of which is valued above S$400. You will need to pay GST to Singapore Customs by declaring a customs payment permit for that high-value item. This can lengthen the clearance period, delaying the time taken for the importation for low-value goods that are ready to be cleared and delivered.
5. Provide complete commercial invoices with accurate information
Any missing information such as non-indication of GST payments can delay the clearance process and delivery of goods. In the event that there is a GST discrepancy, you will need to liaise directly with the recipient to resolve these issues.
We understand that it can be a challenge to stay up to date with the latest regulations. Working with a reliable international delivery service provider can help you keep up with recent changes in import and export rules, and stay informed at every step of the way. Why not sign up for a business account today and find out how we can help you?
