GST Treatment of Media Sales in Singapore: Changes from January 2022
The Inland Revenue Authority of Singapore (IRAS) has underlined the basis for which the supply of media sales will be subject to zero percent goods and services tax (zero-rated GST). The change comes into effect on January 1, 2022.GST, also known as value-added tax (VAT), is a consumption tax imposed on goods and services in Singapore regardless of whether are acquired from domestic or overseas suppliers. The current GST rate is seven percent, although this is planned to be increased in 2022 and will reach nine percent by 2025.
Currently, the supply of media space for online advertising by a taxable person is a zero-rated supply for GST if the advertisement is substantially circulated (at least 51 percent) overseas. Under the changes, if the contractual customer is located outside of Singapore or is a GST-registered person in Singapore, the media sales will be zero-rated.
Like most digital sectors, online advertising has seen immense growth during the pandemic, and coupled with new developments in technology, it has become increasingly challenging for taxpayers to determine whether such media supplies qualify for zero-rated GST.
The newly revised e-tax guide, issued on June 11, 2021, provides in-depth detail of the different GST treatments for the sub-sectors within Singapore’s advertising industries.
What do media sales refer to in Singapore?
According to the IRAS, media sales refer to:
- The sale of advertising airtime for broadcasting via radio or TV;
- The sale of media space for online advertising; and
- The sale of advertising space for hardcopy prints such as on billboards, newspapers, and magazines.
The supply of media sales by local suppliers
As stated earlier, with effect from January 1, 2022, the supply of media sales will be zero-rated if it directly benefits a person overseas or a GST-registered person in Singapore.
For the supply of media sales, the comptroller — the person responsible for the quality of financial reporting in an organization — will regard the contractual client as the sole beneficiary of the services if the following criteria are satisfied:
- The service agreement between the media supplier and their contractual client does not require the services to be provided to another party; and
- The supplier only takes instructions from the contractual client for the service.
The supply of media sales by overseas suppliers to GST-registered businesses in Singapore
From January 1, 2022, if an overseas supplier makes a supply of media sales to a GST-registered person/business in Singapore then the recipient, if they are a reverse charge (RC) business, must apply RC and account for GST on the value of their imported services as if they were the supplier; regardless of the place of circulation of the advertisements.
RC businesses refer to those who are subject to reverse charge when they are not entitled to a full input tax credit or belong to a GST group not entitled to the full input tax credit.Previously, the supply of media sales from an overseas supplier to a GST-registered person fell outside the scope of RC if the advertisements were substantially circulated outside of Singapore.
The supply of digital media sales by overseas suppliers to non-GST registered persons in Singapore
From January 1, 2022, the supply of digital media sales by an overseas supplier to a non-GST registered person in Singapore will be subject to GST, under the Overseas Vendor Registration (OVR) regime.
The OVR regime was issued in January 2020, and obligates foreign digital service providers to register and pay for GST. Businesses must have a yearly global turnover of more than S$1 million (US$731,000) and sell more than S$100,000 (US$73,000) worth of digital services to customers in Singapore, in 12-months.
Currently, the overseas supplier can only charge GST if the advertisements are substantially circulated in Singapore.
The OVR regime is aimed at creating a ‘level playing field’ by protecting local retailers especially since Singapore imports billions of dollars of digital imports yearly.
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