The impact of the COVID-19 pandemic continues to be felt by many sectors and industries in Singapore. The business sector, particularly, has been one of the hardest-hit sectors in the country, particularly affecting such industries as retail, food services, manufacturing and wholesale trade, construction, real estate, and tourism-related industries.
Fortunately, the Singapore government has been providing businesses with the assistance that they need to stay afloat during these tough times. When it comes to the goods and services (GST) tax, particularly, the Inland Revenue Authority of Singapore (IRAS) has provided updates and new guidelines that are focused on supporting businesses and employees.
Find out about all the different schemes that employers and employees can use to support themselves in these trying times.
GST Treatment for COVID-19 Support Measures
The impact of the pandemic is particularly tremendous for the Singaporean workforce. Many employees have been forced to pause or halt their jobs, especially during the beginning of the outbreak. In order to support the employees who are heavily affected by the health crisis, it is highly advised for businesses to provide accommodation and other types of benefits to them during the pandemic period.
To assist businesses in doing this, the IRAS has provided guidance on the various circumstances where the input tax on expenses that businesses may incur in response to the pandemic period can be claimed. These circumstances are as follow:
- Where the employee comes back from a business trip overseas in which their primary purpose was to carry out the employment duties assigned by their company. However, if the company has already been providing the same accommodation to the employee before February 1, 2020, the input tax may not be claimable.
- Where the Malaysian employee, who normally resides outside Singapore, has been required to stay in the country to ensure the continuity of business during the period of Movement Control Order (MCO).
- Where the employee incurs expenses on personal protective equipment, such as masks, thermometers, and hand sanitisers, for the purpose of the business.
- Where the employee incurs expenses on utility bills, telephone bills, monthly subscription fees for mobile phones or broadband while working from home during the pandemic period. However, the input tax is claimable only with respect to the business portion of the incurred expenses.
- Where the company purchases office equipment for home use, such as printers, toner, monitors, and chairs to help facilitate a work-from-home arrangement for its employees during the pandemic period. However, for the input tax to be claimable, the equipment should not be owned by the employees.
GST Treatment for Termination Expenses
As a result of the pandemic and the circuit breaker measures, numerous businesses within certain sectors have been forced to wind up and terminate their operations. In view of this, the IRAS has provided additional guidance on how businesses can claim GST on the expenses they incur in their liquidation and closure. This can be found in the IRAS e-Tax Guide.
For GST-registered businesses that make taxable supplies only before their closure, they are authorised to claim complete input tax on termination expenses since these are attributable to the fully taxable businesses.
Meanwhile, those businesses that make both taxable and exempt supplies before their termination and that have no taxable supply in the prescribed accounting period containing the incurred termination expenses can only claim such input tax as residual input tax in accordance with the input tax recovery formula.
GIRO for GST
The General Interbank Recurring Order (GIRO) is a cashless and paperless payment method that allows individuals and businesses to settle their payments directly to a billing organisation (BO). This convenient payment method has been adopted by the IRAS for the payments of different kinds of tax, including GST.
GST is required to be paid within one month after the end of a business’ GST accounting period. Under GIRO, businesses can avail of a lump sum deduction that will commence for their next GST accounting period following the approval of their GIRO form. The deduction will be made on the 15th of the month after the due date for their payment.
The implementation of the GST treatments for COVID-19 support measures and for termination expenses, as well as the adoption of GIRO as a method of GST payment will surely help both businesses and employees stay up and running during these challenging times.
The coming of the pandemic has indeed largely affected the business sector. Hence, government measures that are aimed at reducing the financial burdens of these businesses have become more necessary than ever. If you need assistance regarding your GST, do not hesitate to reach out to us, as we provide a reliable GST Assisted Self Help Kit for businesses.
Moreover, we at Max Lewis Consultants Pte Ltd also offer a great selection of services that will help you streamline and keep your business on track, including transfer pricing advisory, asset and business valuation in Singapore, corporate secretarial services, and many others. To learn more about how we can assist you in scaling up your business, contact us anytime.