Singapore—Overseas Vendor Registration (OVR) latest developments

On 1 January 2023, the scope of the Singapore Goods and Services Tax (GST) regime was expanded to include all remote services provided by non-resident service providers to customers located in Singapore. The introduction of these rules would pose significant challenges for the industry as it had the potential to bring into scope a wide range of business activities conducted by offshore banks and branches.

Due to the challenges involved, there has been considerable dialogue between the Inland Revenue Authority of Singapore (IRAS). This dialogue has resulted in granting various administrative concessions that were aimed at alleviating these challenges, including the issuance of circular FDD Cir 07/2022 by the Monetary Authority of Singapore (MAS). In the period following the issuance of FDD Cir 07/2022, the industry engaged in further dialogue which brought about additional clarification or detail around the concessions granted.

In February 2023, the MAS issued FDD Cir 03/2023 which seeks to bring the additional clarifications and detail into a single document. We have summarised the key concessions and clarifications that were covered as follow:

1. Divisional registration

For banks opting for divisional registration, individual GST registration numbers would be provided for each branch division and separate GST returns would be filed. Overseas branches would not be able to claim any input tax and would file simplified output tax only GST returns. The overseas branches can opt to be registered as a collective single division or individually as separate divisions.

2. Business-to-Business (B2B) proxies–supplies to funds granted GST remission

For the purpose of applying the remission, the following indicators can be used as a proxy for determining whether a non-individual fund can be regarded as a Qualifying Fund:

I. Whether the fund client appoints a Singapore fund manager (the SFM indicator); or

II. Whether the fund client has a minimum asset under management value of SG$10 million (the AUM indicator).

3. B2B proxies—supplies to multinational enterprises (MNEs)

All remote services provided by the investment banking and corporate banking business (IBCB business) would be treated as B2B supplies and outside of the scope. The exclusion is provided on the basis that Singapore client engaging overseas branch/entity are likely to be an MNE operating in multiple locations or non-individual entities whose operations are sizeable to be venturing overseas. IBCB would generally include commercial banking, corporate finance, sales and trading, treasury services, asset management, custody and fund services and institutional banking.

4. Assessment of GST Registration liability

Overseas banks may perform the assessment of the GST registration liability every five years rather than on a continuous basis. However, in the event of a significant change in the business circumstances (e.g., restructuring or initiates new business under private banking or wealth management) within that five year timeframe, such that it is reasonable to expect the change to result in a breach of the GST registration threshold, IRAS would require the bank to re-assess the registration liability.

5. Exclusion of overseas branches from the scope of OVR

Overseas branches of taxable persons would be excluded from the scope of OVR if it can satisfy all of the following conditions:

I. The overseas branch’s annual value of Business-to-Consumer (B2C) remote services to Singapore does not exceed SG$100,000;

II. The compliance costs associated with complying with the OVR regime would be substantial;

III. Each branch has separate and distinct businesses and/or operation systems and processes, and such distinct systems and processes are critical to the GST compliance process; and

IV. The overseas branch, by virtue of regulatory restrictions, cannot provide to Singapore customers the full suite of services that the branch can provide to customers in the overseas jurisdictions where it resides.

IRAS has accepted that all banks would meet conditions (iii) and (iv), and only (i) and (ii) would need to be satisfied.

6. Non-banking entities

The administrative measures are granted to overseas banks (branches or entities) that are licensed in the jurisdiction they are incorporated or registered in. To the extent non-bank financial institutions face similar significant implementation and compliance difficulties, the IRAS is willing to consider extending these concessions to those institutions. However, these non-bank institutions would need to individually engage with IRAS to obtain such concessions.

7. Concluding remarks

Whilst from the perspective of the banking institutions, a lot has been decided, the dialogue and consultation remain ongoing, and we expect to see further clarification or refinement to these policies. The latest circular makes it clear that these concessions would only be limited to banks and so any “non-bank financial institutions” will need to act quickly to engage with the IRAS to manage any impact to their business activities.

For further information, please contact Senthuran Elalingam.