Singapore goods and services tax treatment of carbon credits

The goods and services tax (GST) (Excluded Transactions) (Amendment) Order 2022 came into operation on 23 November 2022 and excludes the transfer or issuance of a carbon credit or any digital representation of a carbon credit from the scope of GST.

The term “carbon credit” is defined to mean:

(a) a certificate representing an amount of greenhouse gas emissions reduction or removal, generated from any project or programme, and (to avoid doubt) includes a certificate representing the avoidance of an amount of such emissions;
(b) a right to emit any greenhouse gas; or
(c) a means to satisfy any tax or regulatory obligation arising from the emission of any greenhouse gas,

and includes a carbon credit as defined in section 2(1) of the Carbon Pricing Act 2018.

This means that fixed-price carbon credits and eligible international carbon credits under the Carbon Pricing Act 2018 are no longer subject to GST.

The change in GST treatment for carbon credits has been welcomed by market participants. The view is that will help to lower entry barriers to carbon markets, offering an added incentive for companies to go further in their climate mitigation strategies and direct finance towards impactful projects. Equally, it is seen as an important step to establishing Singapore as a carbon services hub.

For further information, please contact Michael Velten.

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