SINGAPORE - Subscribers of streaming and other digital services, take note.
Providing a fictitious overseas billing or residential address in order to game an account with overseas-based vendors may constitute tax evasion once the goods and services tax (GST) for imported digital services kicks in on Jan 1.
Announcing this and other changes to the law in Parliament on Monday (Nov 4), Second Minister for Finance Lawrence Wong said it was necessary to make the misrepresentation of information an offence for the Inland Revenue Authority of Singapore (Iras) to enforce the tax effectively.
This is because suppliers operating overseas will rely on information provided by customers to determine if they should collect GST, he said.
Dubbed the "Netflix tax", overseas vendors of online services such as streaming music or movies will have to pay GST if they have an annual global turnover of over $1 million and make more than $100,000 in providing digital services to Singapore.
The tax, announced during last year's Budget, is aimed at levelling the playing field for local retailers, which must pay GST.
Businesses that supply services to consumers will be required to register, charge and account for GST on sales to customers in Singapore, while business-to-business imported services will be subject to a "reverse charge" regime. This entails local businesses paying GST to the tax authority directly on the services they import.
A spokesman for the Ministry of Finance said that penalties for misrepresentation will be based on two tiers of severity.
Under the first tier, those found guilty of providing false information may be liable to a fine of up to $10,000. Under the second tier, where there is wilful intent to evade GST, a heavier punishment with a custodial sentence may be imposed in addition to the fine, the ministry said.
Iras will consider the relevant factors on a case-by-case basis.
CRYPTOCURRENCIES TO BE EXEMPT FROM GST
Separately under the GST (Amendment) Bill, businesses that trade in digital payment tokens will no longer have to pay GST on their sale and transfer from Jan 1 next year.
The move means cryptocurrencies that function as a medium of exchange will be subject to the same GST exemptions as legal tender.
It will also bring the Republic's tax regime in line with jurisdictions such as Australia and the European Union, said Mr Wong, who is also Minister for National Development.
"Increasingly, we are seeing the acceptance of digital payment tokens as a means of payment for goods and services at local retailers," he noted.
Digital payment tokens are defined by Iras as virtual currencies that are not pegged to any national currency and can be traded by the public without any substantial restrictions on their use, such as bitcoin and ethereum.
Currently, the sale and transfer of such tokens are considered to be supplies of services and thus subject to GST. This results in two tax points - once on the purchase of the cryptocurrency and again on its use as payment for other goods and services subject to GST. The new tax regime will eliminate the first.
Other amendments to the Goods and Services Tax Act include clarifications and improvements to GST administration of imported digital services.
Tax proceedings in the High Court and Court of Appeal will also no longer be heard in private by default from Jan 1, in an effort to improve accountability and promote open justice, Mr Wong said.
To safeguard the interests of taxpayers who lodge appeals to the GST Board of Review, definitions of "accountant" and "advocate and solicitor" will be introduced to ensure that representatives handling appeals meet certain professional qualifications.