GST on imported digital services from 2020
Music streaming, marketing by overseas suppliers among those to be taxed
In two years, consumers here will have to start paying goods and services tax (GST) for imported digital services such as music and movies streaming as well as downloads of games, applications and e-books.
Finance Minister Heng Swee Keat announced during his Budget speech yesterday that the Government will introduce GST for imported services from Jan 1, 2020.
This will affect business-to-business (B2B) and business-to-consumers (B2C) imported services.
"Today, services such as consultancy and marketing purchased from overseas suppliers are not subject to GST. Local consumers also do not pay GST when they download apps and music from overseas.
"This change will ensure that imported and local services are accorded the same treatment," Mr Heng said.
This tax will affect businesses that use services including marketing, accounting, information technology and management from overseas suppliers.
For consumers, the tax will also impact listing fees on electronic marketplaces, software and online subscription fees.
Countries such as Australia, Japan, South Korea and New Zealand and the European Union have introduced GST on imported services.
This change will ensure that imported and local services are accorded the same treatment. Finance Minister Heng Swee Keat
To tax B2C imported services, the Government will get overseas suppliers and electronic marketplace operators, such as app stores, to register with the Inland Revenue Authority of Singapore (Iras).
Once registered, these suppliers will collect GST for Iras.
This applies to overseas vendors whose annual global turnover exceeds $1 million and whose sale of digital services to consumers in Singapore exceeds $100,000.
The Government is also continuing to review whether to impose GST on low-value imported physical goods.
Currently, GST is levied on imported physical goods - including those purchased online - worth more than $400.
The Government is reviewing international developments before deciding on what measures to take for low-value physical goods imported into Singapore.
Experts said that the GST on online services from overseas suppliers is just the beginning of taxation being adapted to the digital landscape and new consumer patterns.
Mr Chia Seng Chye, tax services partner at Ernst & Young Solutions, said: "Traditionally, tax systems were based on where providers are located.
"Now, people use electronic means to deliver their services, so the question is how to enforce and administer taxation to suppliers without a physical presence.
"This is just the tip of the iceberg. We are moving from a conventional taxation model to something new. The next thing might be to lower the $400 threshold, although the question is what the new threshold will be."
Dr Kelvin Law, assistant professor of accounting at Nanyang Business School, said: "This move also helps to protect local services. People will go to overseas suppliers if there is no taxation there and local ones are being taxed."