Ministry of Finance, Singapore Customs’ Post

On January 1, 2023, Singapore began imposing Goods and Services Tax (GST) on low-value goods costing S$400 or below. Under the Overseas Vendor Registration (OVR) regime, GST-registered overseas suppliers of low-value goods to consumers in Singapore must charge and collect GST at the prevailing rate (9% as of 2024). The implementation of GST on low-value goods 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 sellers and platforms. As early as 2017, the Government explored various approaches to impose GST on transactions conducted over the digital economy as outlined and discussed 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 because it was assessed to be the most effective and efficient taxation model for Singapore 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 it was implemented. A year into the implementation of GST on imported low-value goods, the Inland Revenue Authority of Singapore (IRAS) and Ministry of Finance, Singapore Customs looked back 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 with businesses like UPS. Ultimately, it demonstrated Singapore’s commitment to aligning tax policies with the ever-evolving global business landscape. The case study on Singapore’s implementation of OVR is co-authored by Annie Koh, PhD, Sin-Mei Cheah (Dr) and Themin Suwardy. It is available at https://smu.sg/mqgk. #SMUCases