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G
S
T
c o m m o n
Sales
black hole
Undercover
customer
International visa
Money
changer
e r r o r s
“Travelling”
expenses
...
3. Purchases
2. Services
Sales
1. Goods
OSESZRSR
Non-taxableTaxable
GST
SR – Standard-rated
ZR – Zero-rated
ES – Exempt su...
1. GSTon
Goods
General
Understanding
Direct
shipments
Export
sales
Local
sales
OS
ZR
SR
GST %
0
CustomerYou
Customer
CustomerSupplier
Invoice
• Sale of residential properties
• Sale of investment precious
metals (IPM) – gold, silver,
platinum
• Goods delivered fro...
Sales
black hole
Zero-rated
Standard-rated
ES
OS
ZR
SR
Export
sales
Local
sales
GST %
0
Non-
ordinary
transac-
tionsExport...
#1 Sales black hole
1. Sale or disposal of business assets
2. Trade-in transactions
3. Recovery of expenses
4. Deemed supp...
Advanced
Understanding
1. GSTon
Goods
Direct
shipments
Exports with
documents
Local
deliveries
OS
ZR
SR
GST %
0
LocalYou
Overseas
OverseasOverseas
Supplier
NOT ...
ZR
SR
Exports with
documents
Local
deliveries
Certainty that goods
will be exported
?
Control over export
arrangement
• Go...
Undercover
customer
ZR
SR
Exports with
documents
Local
deliveries
GST %
0
Uncertainty
of export
Where “exports”
become sta...
#2 Undercover customer
E.g. Overseas customer instructs you to deliver
goods to a local location, e.g., its related compan...
General
Understanding
2. GSTon
Services
Overseas
customers
Local
customers
ZR
SR
GST %
0
CustomerYou
Customer
CustomerContractor
Invoice
By definition,
a supply o...
• Lease of residential properties
• Financial services
Private transactions,
e.g., free services
ES
OS
ZR
SR
Exempt
servic...
#3 Banker role-play
2 common types:
• Realised exchange gain/loss from
foreign currency transactions
• Interest income fro...
Exceptions
Not applicable
-UnrealisedExchange gain/loss
International
service
ZRForeign
bank
Interest income
• NET gain/lo...
Advanced
Understanding
2. GSTon
Services
InternationalInternationalInternationalInternational
services
All other
services
ZR
SR
GST %
0
CustomerYou
Customer
Custom...
ZR
SR
InternationalInternationalInternationalInternational
services
All other
services
GST %
0
As zero-rating of service i...
International
visa
ZR
SR
InternationalInternationalInternationalInternational
services
All other
services
GST %
0
“Non-
in...
#4 International visa
As a general guide, services may NOT be zero-rated where:
• there are local persons who stand to “di...
3. GSTon
Purchases
Common
Misunderstanding
Exempt
purchases
Out-of-scope
purchases
e.g., free services
Zero-rated
purchases
Local
purchases
ES
OS
ZR
SR
SupplierYou
S...
#5 Expense overload
TOP 3 types of purchases NOT to claim:
1. Specifically disallowed under GST
regulations [Regulations 2...
Expense overload
• Club subscription/transfer fees
• Staff medical expenses & insurance premiums
(except obligations under...
Expense overload
Examples:
• Purely private or personal activities
• Free activities provided without commercial
reasons
•...
Expense overload
Both the original purchase and input tax
amounts have to be reversed in the current GST
period.
3. Input ...
#6 Money changer
For imports, exchange conversion is not an issue as GST is
calculated in S$ by the customs department and...
#7 “Travelling” expenses
Common examples:
• IDD charges
• air tickets
Zero-rated expenses (i.e.,
international services in...
Summary of 7common GST errors
Expense overload: They’re not supposed to be there
Money changer: Use supplier’s exchange ra...
References
• e-Tax Guide: A Guide on Exports
• e-Tax Guide: Guide on Hand-Carried Exports Scheme
• e-Tax Guide: Clarificat...
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7 common GST errors

Not just 7 errors, but 7 groups of common errors to avoid:
1. Sales black hole: “Sales” that are commonly omitted
2. Undercover customer: Customer trying to act as export agent – say "no"
3. Banker role-play: You sometimes play banker
4. International visa: Not all services provided to an overseas person can be zero-rated - follow the GST Act
5. Expense overload: They’re not supposed to be there
6. Money changer: Use supplier’s exchange rate
7. “Travelling” expenses: Zero-rated expenses are considered taxable, even though at $0

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7 common GST errors

  1. 1. G S T c o m m o n Sales black hole Undercover customer International visa Money changer e r r o r s “Travelling” expenses Expense overload Banker role-play
  2. 2. 3. Purchases 2. Services Sales 1. Goods OSESZRSR Non-taxableTaxable GST SR – Standard-rated ZR – Zero-rated ES – Exempt supplies OS – Out-of-scope supplies Danger Level Warning Watch out 3 key areas: 7 danger spots Based on Singapore context
  3. 3. 1. GSTon Goods General Understanding
  4. 4. Direct shipments Export sales Local sales OS ZR SR GST % 0 CustomerYou Customer CustomerSupplier Invoice
  5. 5. • Sale of residential properties • Sale of investment precious metals (IPM) – gold, silver, platinum • Goods delivered from & to places outside Singapore • Sales made within Free Trade Zone (FTZ) or Zero GST (ZG) warehouse ES OS ZR SR Exempt goods Out-of-scope goods Export sales Local sales Excludes: • movable furniture & fittings • service fees GST % 0
  6. 6. Sales black hole Zero-rated Standard-rated ES OS ZR SR Export sales Local sales GST % 0 Non- ordinary transac- tionsExports not supported by sales
  7. 7. #1 Sales black hole 1. Sale or disposal of business assets 2. Trade-in transactions 3. Recovery of expenses 4. Deemed supplies: Goods given as gifts or samples 1. Goods to be stored in overseas warehouse 2. Parts & materials for work overseas 3. Equipment for leasing overseas 4. Goods returned to overseas supplier 5. Goods on consignment (i.e., not yet considered sold) Zero-rated exports not supported by sales: Standard-rated transactions commonly omitted (usually extraordinary or non-monetary in nature):
  8. 8. Advanced Understanding 1. GSTon Goods
  9. 9. Direct shipments Exports with documents Local deliveries OS ZR SR GST % 0 LocalYou Overseas OverseasOverseas Supplier NOT nationality of customer BUT destination of goods Invoice
  10. 10. ZR SR Exports with documents Local deliveries Certainty that goods will be exported ? Control over export arrangement • Goods delivered to freight forwarder appointed by customer • You instruct local supplier to export goods to customer • Good hand-carried out of Singapore ?Custody of goods Indirect (examples)Direct3Cs of Exports As zero-rating of exports is a “relief” from GST, IRAS prescribes specific export documents to be maintained GST % 0
  11. 11. Undercover customer ZR SR Exports with documents Local deliveries GST % 0 Uncertainty of export Where “exports” become standard-rated
  12. 12. #2 Undercover customer E.g. Overseas customer instructs you to deliver goods to a local location, e.g., its related company E.g. Local customer promises to export goods and provide you the shipping documents later Rule of thumb for exports: IF you cannot be certain that all the goods will be exported, then you should charge standard-rated GST
  13. 13. General Understanding 2. GSTon Services
  14. 14. Overseas customers Local customers ZR SR GST % 0 CustomerYou Customer CustomerContractor Invoice By definition, a supply of service is made in Singapore if you (i.e., the supplier) belong in Singapore. Therefore, for a locally-registered GST company/ business, any service invoiced CANNOT be out-of-scope.
  15. 15. • Lease of residential properties • Financial services Private transactions, e.g., free services ES OS ZR SR Exempt services Out-of-scope services Oversea customers Local customers Banker role-play GST % 0
  16. 16. #3 Banker role-play 2 common types: • Realised exchange gain/loss from foreign currency transactions • Interest income from bank deposits (i.e., “loans” to banks) Financial services are not confined to financial institutions. Non-financial businesses may also provide “financial services”.
  17. 17. Exceptions Not applicable -UnrealisedExchange gain/loss International service ZRForeign bank Interest income • NET gain/loss • Absolute amount ESRealisedExchange gain/loss - ESLocal bank Interest income RemarksGSTFinancial services Also, report financial services under the correct supply type
  18. 18. Advanced Understanding 2. GSTon Services
  19. 19. InternationalInternationalInternationalInternational services All other services ZR SR GST % 0 CustomerYou Customer CustomerContractor Invoice NOT nationality of customer BUT type of service
  20. 20. ZR SR InternationalInternationalInternationalInternational services All other services GST % 0 As zero-rating of service is a “relief” from GST, the GST Act [S.23(1)] prescribes specific types of services called “international services” that can be zero-rated and the conditions for zero-rating.
  21. 21. International visa ZR SR InternationalInternationalInternationalInternational services All other services GST % 0 “Non- international” services Where “overseas” services become standard-rated
  22. 22. #4 International visa As a general guide, services may NOT be zero-rated where: • there are local persons who stand to “directly benefit” from the services • they are “directly in connection” with land or goods (excluding exports) situated in Singapore Legal definitions and interpretations. When in doubt, consult IRAS To be zero-rated, International services • must be specifically listed in the GST Act • comply with the conditions stated. Otherwise, services are standard-rated.
  23. 23. 3. GSTon Purchases Common Misunderstanding
  24. 24. Exempt purchases Out-of-scope purchases e.g., free services Zero-rated purchases Local purchases ES OS ZR SR SupplierYou Supplier Imports Non-taxable purchases i.e., purchases from non- GST registered suppliers GST % 0 ALL generally treated as “non- taxable”, do NOT report
  25. 25. #5 Expense overload TOP 3 types of purchases NOT to claim: 1. Specifically disallowed under GST regulations [Regulations 26 & 27 of the GST (General) Regulations] 2. Not for the purpose of the business or directly attributable to taxable supplies 3. Where supplier has been unpaid for more than 12 months NOT all GST incurred are claimable.
  26. 26. Expense overload • Club subscription/transfer fees • Staff medical expenses & insurance premiums (except obligations under Work Injury compensation Act) • Motor car expenses • Benefits for family members or relatives of staff • Any transaction involving betting and gaming 1. Input tax specifically disallowed under GST regulations
  27. 27. Expense overload Examples: • Purely private or personal activities • Free activities provided without commercial reasons • Activities with non-business objects in philanthropic, religious, political, or public domain • Activities for the making of exempt supplies 2. Input tax not for the purpose of the business or directly attributable to taxable supplies
  28. 28. Expense overload Both the original purchase and input tax amounts have to be reversed in the current GST period. 3. Input tax unpaid to supplier for more than 12 months
  29. 29. #6 Money changer For imports, exchange conversion is not an issue as GST is calculated in S$ by the customs department and has to be paid in order to clear the goods. For local supplier who invoices in foreign currency, claim input tax based on the supplier’s S$ equivalent on the invoice, i.e., ignore your own in-house exchange rate.
  30. 30. #7 “Travelling” expenses Common examples: • IDD charges • air tickets Zero-rated expenses (i.e., international services invoiced by a GST-registered company/ business to you) are considered “taxable” expenses and have to be reported so.
  31. 31. Summary of 7common GST errors Expense overload: They’re not supposed to be there Money changer: Use supplier’s exchange rate “Travelling” expenses: Zero-rated expenses are considered taxable, even though at $0 5. 6. 7. Purchases Banker role-play: You sometimes play banker International visa: Not all services provided to an overseas person can be zero-rated - follow the GST Act 3. 4.Services Sales black hole: “Sales” that are commonly omitted Undercover customer: Customer trying to act as export agent – say “no” 1. 2. Sales Goods OSESZRSR Non-taxableTaxable GST
  32. 32. References • e-Tax Guide: A Guide on Exports • e-Tax Guide: Guide on Hand-Carried Exports Scheme • e-Tax Guide: Clarification on “Directly in Connection With” and “Directly Benefit” • e-Tax Guide: GST on Non-Business Receipts – The Business Tests and Effect on Input Tax Claims • Goods and Services Tax Act (Chapter 117A) • Goods and Services Tax General Regulations Image credits Images are the copyrighted property of 123RF Limited, its Contributors or Licensed Partners and are being used with permission under license. www.123rf.com No image and/or photo may be copied or downloaded without permission from the respective copyright owner/s. © All rights reserved ACCOUNTERN.COMACCOUNTERN.COMACCOUNTERN.COMACCOUNTERN.COM

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