Singapore will implement, effective 1 January 2019, customer accounting for the local sale of prescribed goods by a Goods and Services Tax (GST)-registered supplier to a GST-registered customer for his business purpose if the GST-exclusive value of the sale exceeds SGD10,000 (approx. US$7650) in a single invoice. The prescribed goods are mobile phones, memory cards and off-the-shelf software.

Based on the e-Tax Guide on Customer Accounting for Prescribed Goods issued by the Inland Revenue Authority of Singapore (IRAS) on 15 September 2017, the IRAS has clarified that prescribed goods exclude:

• Mobile phones that are bundled with mobile subscriptions and call services plans (excluding pre-paid plans) supplied by a GST-registered approved mobile telecommunication service provider
• Flash drive with integrated USB interface
• Software that is pre-loaded on any hardware or computer, as part of the supply of the hardware or computer

Customer accounting

Under customer accounting, the GST-registered customer will be responsible for accounting for the sales and the output tax payable on behalf of the GST-registered supplier. He will also be able to claim the input tax on the purchase of the prescribed goods, subject to the conditions governing input tax claims.

The GST-registered supplier should only collect the GST-exclusive price of the prescribed goods and issue a valid tax invoice with the following additional details to the GST-registered customer:

• Customer's GST registration number
• A statement: "Sale made under customer accounting. Customer to account for GST of S$X." or "Customer accounting: Customer to pay GST of $X to IRAS." – where $X refers to the amount of output tax payable on the supply of prescribed goods for which the GST-registered customer will account on the GST-registered supplier's behalf

The GST-registered supplier should only report the GST-exclusive value of the prescribed goods sold as standard-rated supplies in his GST return. There is no output tax payable to be reported in respect of such sales.

Businesses that are not trading in prescribed goods but do make occasional purchases of such goods exceeding SGD10,000 for their own business use may seek prior approval from the IRAS to be exempt from customer accounting if certain conditions are satisfied.

Businesses should also be aware of sales straddling the implementation date of 1 January 2019. Customer accounting is required for prescribed goods delivered before 1 January 2019 where the tax invoice is only issued and payment received on or after 1 January 2019.

Affected GST-registered suppliers and customers should prepare early for customer accounting of prescribed goods

The proposed implementation of customer accounting for prescribed goods will involve changes to GST accounting, recording and documentation for affected GST-registered suppliers and customers.

For GST-registered suppliers, this will include the ability to manage the following areas to facilitate customer accounting:

• Classify mobile phones, memory cards and off-the-shelf software as prescribed goods
• Implement processes to check if a customer is GST-registered and verify if the prescribed goods purchased are for the customer's business purpose
• Track the sales of prescribed goods and identify those sales where the GST-exclusive price exceeds SGD10,000 in a single invoice
• Change the system logic (if GST reporting is supported by accounting system) such that the system can automatically recognize and capture the sales of prescribed goods that are subject to customer accounting
• Exclude the output tax from the GST return for the affected sales transactions that are subject to customer accounting
• Issue valid tax invoices with the additional details required
• Make GST adjustments for credit notes issued for the sales of prescribed goods subject to customer accounting
• Ensure that the customer accounting rules are correctly applied on sales straddling the implementation date of 1 January 2019

For GST-registered customers, this will include the ability to manage the following areas to facilitate customer accounting:

• Ensure that the correct treatment is adopted on the purchase of prescribed goods from the GST-registered supplier (e.g., if the supplier incorrectly charged 7% GST when the GST-exclusive price of the prescribed goods exceeds SGD10,000 in a single invoice)
• Inform the GST-registered supplier of his GST-registration number
• Receive valid tax invoices with the necessary additional details
• Change the system logic (if GST reporting is supported by accounting system) such that the system can automatically recognize the purchase transactions that are subject to customer accounting
• Where customer accounting is required on the purchase of prescribed goods, to also account for the value of the prescribed goods and the output tax payable in the GST return

Even though the new customer accounting rules will only be effective from 1 January 2019, GST-registered suppliers and customers that are affected by the new rules should prepare early for implementation.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Solutions LLP, Singapore

• Yeo Kai Eng, Indirect Tax Leader
  kai.eng.yeo@sg.ey.com
• Chew Boon Choo
  boon-choo.chew@sg.ey.com

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ATTACHMENT

PDF version of this Tax Alert