Tax & Accounting Blog

Singapore Address Tax Challenges Posed by the Digital Economy

BEPS, Blog, Checkpoint, International Reporting & Compliance, ONESOURCE August 24, 2017

On August 17, 2017, the Inland Revenue Authority of Singapore (IRAS) published a speech by the Senior Minister of State for Law and Finance on the challenges the international tax community faces as a result of the digital economy. See BEPS Action 1.

According to the speech, digitalization is blurring the boundaries between the “traditional” economy and the “digital” economy, and is challenging “conventional notions of taxation.” As a result, some jurisdictions are adjusting their GST systems to ensure a level playing field between local businesses that are GST-registered and foreign-based businesses that are not. 

In January 2016, IRAS updated information on its website regarding GST and e-commerce as it relates to maintenance of computer software. IRAS says maintenance of computer software is a supply of services. To determine the GST treatment, taxpayers need to consider the original sale of the computer software and assess whether the maintenance service is directly in connection with goods. In October 2015, IRAS updated information on its website concerning the provision of international services. The updated guidance states that services are considered international services if they fall within the provisions of Section 21(3) of the GST Act

With respect to the taxation of the digital economy, Singapore advocates three high-level principles: (i) Tax certainty for businesses; (ii) tax neutrality between traditional and digital business models; and (iii) international consensus.

Tax certainty for businesses

Tax policies should provide tax certainty and minimize regulatory and compliance burdens.

Tax neutrality between traditional and digital business models

To ensure fair competition between these two different types of business models, there should be fairness in terms of the taxes paid by businesses regardless of their extent of digitalization.

International consensus

Singapore supports jurisdictions working together to achieve consensus on issues relating to the taxation of the digital economy. Singapore is a member of the OECD’s Task Force on the Digital Economy (TFDE), which is developing internationally-agreed policy options to address challenges posed to international tax rules by the digital economy. Singapore also participates in the TFDE Bureau, which guides the discussion of the TFDE.