Singapore – change in the treatment of retrospective TP adjustment from GST and custom perspective

On 9 November 2020, the Inland Revenue Authority (IRAS) released a new tax guide for TP adjustments in Singapore and this includes the introduction of an administrative concession to reduce the compliance cost and administrative burden on businesses.

With this new concession, importers are no longer required to make a disclosure and pay the additional import GST as result of a TP adjustment (either downward or upward) if the import GST to be accounted for is fully claimable by the importer (i.e. there is no tax impact and there is no impact on the input tax claimable by a related party supplier and its customer).

These concessions are granted in the following circumstances:

  1. Taxable imports – the Company is entitled to full input tax credit on import when the TP adjustment is made
  2. Standard-rated supplies – the Company’s related party customer is entitled to full input tax credit on the supply made by the company, and the company is also entitled to full input tax credit on its purchases and expenses at the time when the TP adjustment is made.
  3. Zero-rated and exempt supplies – the Company is entitled to full input tax credit on its purchases and expenses when the TP adjustment is made.

If the above concession applies, there is no need to file a voluntary disclosure or even notify Singapore Customs. However, relevant supporting documentation will need to be retained. If however you should not qualify for the concession I would recommend to submit voluntary disclosure to Singapore Customs  in case retrospective TP adjustment with influence on import value were done/or are being done. Based on the legislation, under Section 128 of the Customs Act, submission of an incorrect declaration, which means incorrect value as well constitutes an offense. In theory, fines of up to SGD 10,000 and/or imprisonment for up to 12 months may be imposed. This high end of punishment was however not been seen in the past. For purposes of GST in case  of under-accounts for any output GST or over-claims any input GST arising from the TP adjustments, the SG tax authorities can impose a penalty of up to 200% of GST undercharged for the submission of incorrect GST returns.

Image source: http://unsplash.com

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