Overseas vendor registration regime: Singapore’s goods and services tax on the digital economy

• Main Authors: KOH, Annie, CHEAH, Sin Mei, SUWARDY, Themin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: E-commerce; Consumption; Tariffs; Regulatory compliance; Digital platforms; Tax planning; Accounting; Asian Studies; E-Commerce
• Online Access: https://ink.library.smu.edu.sg/cases_coll_all/505; https://cmp-shop.smu.edu.sg/products/overseas-vendor-registration-regime-singapore-s-goods-and-services-tax-on-the-digital-economy?variant=42376084979754
• Institution: Singapore Management University

In 2023, Singapore introduced a Goods and Services Tax (GST) on low-value goods (LVG) costing SGD$400 or below. Under the Overseas Vendor Registration (OVR) regime, GST-registered overseas suppliers of LVG to consumers in Singapore must charge and collect GST at the prevailing rate (9% as of 2024). The implementation of GST on LVG came at a time of significant shift in consumer purchasing behaviour from brick-and-mortar stores to e-commerce, particularly during the COVID-19 pandemic. The new measures aimed to ensure equitable taxation and maintain a level playing field, enabling local businesses to compete fairly with international e-commerce platforms. As early as 2017, the Government explored various approaches to impose GST on LVG as outlined by the Organisation for Economic Co-operation and Development (OECD). Eventually, the vendor collection model, which is also used in Australia and New Zealand, was adopted due to its effectiveness and efficiency in terms of GST collection, compliance and administrative costs, and feasibility of implementation. Recognising that suppliers would need time to adapt, the policy change was officially announced in 2021, two years before implementation. A year into the implementation of GST on imported LVG, the joint task force of IRAS and Customs reflected on the two years of dedicated effort they had invested into the entire process. They believed the seamless rollout, achieved without major issues and a high level of transparency, could be attributed to meticulous planning, early and regular communication, massive outreach efforts, and extensive consultation. Ultimately, it demonstrated Singapore’s commitment to aligning tax policies with the ever-evolving global business landscape. What lessons could be drawn from the agencies’ experience with the OVR regime that can be shared with other tax jurisdictions looking to implement similar taxation on LVG? What could they have done differently, if at all? The learning objectives include analysing the taxation policies on global e-commerce and their implications, comparing the GST collection models recommended by the OECD and understanding why Singapore chose the vendor collection model. Students will assess the compliance of hypothetical companies with Singapore’s OVR requirements. Finally, they can reflect on policy lessons from the OVR implementation and its broader applicability.