Claiming GST on Expenses for Qualifying Funds
- a22162
- Feb 22
- 15 min read
Updated: Feb 23
GST Claims for Qualifying Funds
GST Remission
GST Remission for Qualifying Funds in Singapore
What is GST Remission?
GST remission is a mechanism that allows qualifying funds in Singapore to recover the Goods and Services Tax (GST) they incur on their expenses.
This is designed to reduce the cost of doing business for these funds and enhance Singapore's competitiveness as a fund management hub.
Benefits of GST Remission
Reduced Costs: Recovering GST can significantly reduce the operating expenses of qualifying funds.
Enhanced Competitiveness: GST remission helps to make Singapore a more attractive location for fund managers.
Support for the Financial Industry: This incentive supports the growth and development of Singapore's fund management sector.
By understanding the eligibility criteria and following the prescribed procedures, qualifying funds can effectively claim GST remission and optimize their tax position in Singapore.
Claiming GST on Expenses for Qualifying Funds
Navigating GST claims on expenses for qualifying funds in Singapore involves understanding specific regulations and guidelines set by the Inland Revenue Authority of Singapore (IRAS). Here's a breakdown of key points:
Key Considerations:
GST Remission:
Singapore provides a GST remission to allow qualifying funds to recover GST incurred on their expenses. This is designed to maintain Singapore's competitiveness in the fund management industry.
The aim is to prevent GST from becoming an additional cost for these funds.
Qualifying Funds:
Eligibility for GST remission is tied to whether a fund meets the conditions of specific income tax concessions under the Income Tax Act (e.g., sections 13CA, 13X, and 13H).
Therefore, a fund must first qualify for the relevant income tax concessions to be eligible for GST remission.
Statement of Claims:
Qualifying funds typically claim GST through quarterly Statements of Claims filed with IRAS.
Specific requirements and documentation are necessary for these claims.
Eligible Expenses:
Generally, qualifying funds can recover GST on expenses incurred for their qualifying investment activities, with some exceptions.
It's important to be aware of disallowed expenses as defined in the GST regulations.
Tax Invoices:
Valid tax invoices are crucial for claiming GST.
IRAS provides guidelines on the required information and format for these invoices.
Administrative Concessions:
IRAS does provide some administrative concessions, for things such as timing of claims, and in certain situations where the fund is new, and may not have a full year of qualifying data.
In summary:
The ability to claim GST on expenses for qualifying funds in Singapore is a valuable benefit. However, it's critical to understand the specific criteria and procedures outlined by IRAS to ensure compliance.
Extension of GST Remission to Section 13H Funds
It's important to understand how GST remission interacts with Singapore's fund tax incentive schemes, including those under Section 13H (which was renumbered to Section 13G). Here's a breakdown:
Key Points:
GST Remission and Fund Tax Incentives:
The ability to claim GST remission is often linked to whether a fund qualifies for specific income tax concessions. This means that if a fund is eligible for certain tax incentives, it may also be eligible for GST remission on qualifying expenses.
Therefore, the GST remission is designed to work in conjunction with the income tax incentive schemes.
Section 13H/13G Funds:
GST remission has been extended to approved venture capital funds under what was section 13H of the Income Tax Act, and is now section 13G.
This is designed to support the venture capital industry in Singapore.
General GST Remission Information:
To qualify for GST remission, funds generally must be managed by a prescribed fund manager in Singapore and meet the conditions for the relevant income tax concessions.
Qualifying funds typically file quarterly Statements of Claims with IRAS to recover GST.
Qualifying Conditions
When discussing the qualifying conditions for GST remission for funds in Singapore, it's essential to understand that these conditions are closely tied to the requirements for income tax concessions. Here's a breakdown of the key qualifying conditions:
Core Qualifying Conditions:
Managed by a Prescribed Fund Manager in Singapore:
A fundamental requirement is that the fund must be managed by a fund manager that is prescribed in Singapore. This emphasizes the need for a local presence and management.
Satisfaction of Income Tax Concession Conditions:
Eligibility for GST remission is contingent on the fund meeting the conditions for specific income tax concessions under the Income Tax Act. This is a crucial link.
Essentially, the fund must qualify for the relevant tax incentive schemes (like those under Sections 13G, and others) to be eligible for GST remission.
It is very important to understand that the fund must meet the income tax concession conditions at the end of the preceding financial year.
Filing of Quarterly Statements of Claims:
Qualifying funds are required to file quarterly Statements of Claims with the Inland Revenue Authority of Singapore (IRAS) to claim the GST incurred. This is the formal process for recovering the GST.
Additional Considerations:
Documentation:
Maintaining accurate and complete records is essential. This includes valid tax invoices and other supporting documentation.
Compliance:
Adherence to all IRAS guidelines and regulations is critical.
In essence, the qualifying conditions are designed to ensure that GST remission is provided to funds that contribute to Singapore's financial ecosystem and meet the necessary regulatory requirements.
Example in determining the eligibility of GST remission in the financial year 2018:
To illustrate the determination of GST remission eligibility, let's consider a hypothetical example within the 2018 financial year. It's crucial to remember that eligibility hinges on meeting the income tax concession requirements of the preceding financial year.
Hypothetical Scenario:
Fund: "Alpha Venture Fund"
Financial Year End: December 31st
Goal: Determine Alpha Venture Fund's GST remission eligibility for the 2018 financial year.
Key Steps and Considerations:
Preceding Financial Year:
To determine eligibility for GST remission in 2018, we must assess whether Alpha Venture Fund met the relevant income tax concession conditions as of December 31, 2017 (the preceding financial year-end).
Income Tax Concession:
Let's assume Alpha Venture Fund aimed to qualify under a specific income tax concession (e.g., a relevant section of the Income Tax Act).
This would involve meeting specific criteria related to:
The nature of the fund's investments.
The fund's management structure.
Other regulatory requirements.
Assessment of Compliance:
Alpha Venture Fund would need to have ensured that, as of December 31, 2017, it complied with all the stipulated conditions of the chosen income tax concession.
This would require proper record keeping, and auditing to ensure compliance.
GST Remission Eligibility:
If Alpha Venture Fund successfully met the income tax concession conditions as of December 31, 2017, it would be eligible for GST remission throughout the 2018 financial year.
Conversely, if it failed to meet those conditions, it would not be eligible.
Claiming GST:
If eligible, Alpha Venture Fund would then proceed to file quarterly Statements of Claims with IRAS to recover the GST incurred on qualifying expenses during 2018.
Important Notes:
Documentation: Thorough documentation is paramount. This includes records of investments, fund management activities, and compliance with income tax concession requirements.
In essence:
The key takeaway is that GST remission eligibility is "backwards-looking." It depends on meeting the income tax concession requirements of the previous financial year.
Administrative Concession
When discussing "administrative concessions" in the context of GST remission for qualifying funds in Singapore, it refers to certain flexibilities and allowances provided by the Inland Revenue Authority of Singapore (IRAS) to ease the compliance burden for these funds. Here's a breakdown of what that generally entails:
Key Aspects of Administrative Concessions:
Flexibility in Filing Statements of Claims:
IRAS provides some leeway in the timing of filing quarterly Statements of Claims. For example, even if the strict due date is missed, claims might still be allowed if certain conditions are met. This can be very helpful for funds that have complex accounting.
Specifically, that the GST claims are made on tax invoices dated within the relevant quarter; and That the quarterly Statements of Claims are filed within 5 years from the end of the relevant quarter.
Addressing Timing Issues for New Funds:
New funds might face challenges in immediately meeting all the conditions for income tax concessions. IRAS may provide concessions to allow these funds to claim GST incurred, especially in situations where they are working towards meeting those requirements.
Enhanced administrative concession, If a fund cannot meet the conditions of the specific income tax concession at the end of the first year of the grant of income tax concession as it is unable to meet the minimum spending requirement, but the fund is able to meet the conditions at the end of the second year, the fund can claim the GST incurred in the second year.
Handling Invoices Addressed to Fund Managers or Umbrella Funds:
In certain complex structures, invoices might be addressed to the fund manager or an umbrella fund rather than the individual sub-fund. IRAS provides concessions to allow these sub-funds to still claim the GST, subject to specific conditions and documentation.
Easing Compliance Burdens:
Overall, these administrative concessions aim to reduce the compliance burden on qualifying funds, allowing them to focus on their investment activities while still adhering to GST regulations.
Important Considerations:
While these concessions provide flexibility, it's crucial to understand the specific conditions that must be met.
In essence, administrative concessions are designed to provide practical relief to qualifying funds while maintaining the integrity of the GST system.
Example: Fund meets the conditions of income tax concession at the end of first year
It's helpful to illustrate how a fund's eligibility for GST remission is determined based on its compliance with income tax concession conditions. Here's a scenario to clarify:
Scenario: "TechGrowth Ventures" Fund
Fund Type: Venture capital fund.
Income Tax Concession: A fund using a section of the Singapore Income Tax Act, that has specific requirements for minimal local spending.
Financial Year End: December 31st.
Year 1: Establishing the Fund
TechGrowth Ventures is established. Throughout the first year, it focuses on making qualifying investments and building its portfolio.
However, due to the initial setup and investment phase, it does not meet the full local spending requirements of its chosen income tax concession by the end of its first financial year (December 31st, Year 1).
Year 2: Achieving Compliance
In Year 2, TechGrowth Ventures continues its investment activities and successfully increases its local spending.
By December 31st, Year 2, it has now met all the conditions of the income tax concession.
GST Remission Implications:
Year 1:
Because TechGrowth Ventures did not meet the income tax concession requirements by the end of Year 1, it would generally not be eligible for GST remission during Year 2.
Year 2:
Because TechGrowth Ventures meets the income tax concession requirements by the end of year 2, it will be eligible for GST remission during year 3.
Administrative concession:
IRAS may provide an administrative concession in this type of situation. If the fund can meet the income tax concession requirements by the end of year 2, then the fund can claim GST incurred during year 2.
Key Takeaways:
"Look-Back" Principle: GST remission eligibility is determined by whether the fund met the income tax concession conditions at the end of the preceding financial year.
Importance of Compliance: It's crucial for funds to diligently track their compliance with income tax concession requirements.
Administrative flexibility: IRAS does allow for some administrative flexibility, especially in situations where a fund is ramping up its operations.
Enhanced Administrative Concession
When discussing "enhanced administrative concessions" in the context of GST remission for qualifying funds in Singapore, it's crucial to understand that these concessions are designed to provide added flexibility, particularly for funds that are in their early stages of operation.
Here's a breakdown of the "enhanced administrative concession" as it pertains to GST and qualifying funds:
Key Points:
Addressing Minimum Spending Requirements:
A common requirement for certain income tax concessions is that funds must meet minimum local spending requirements.
New funds may encounter difficulties in meeting these requirements during their initial year of operation.
Providing Additional Time:
The "enhanced administrative concession" allows funds that fail to meet the income tax concession conditions (specifically minimum spending requirements) in their first year to have a second year to achieve compliance.
If the fund successfully meets the conditions by the end of the second year, they can then claim the GST incurred during that second year.
Conditions and Limitations:
It is important to understand that the GST incurred during the first year, when the fund did not meet the requirements, remains not claimable.
The claims can only be made after the fund has proven that they have completed the requirements at the end of the second year.
Simplified Process:
Funds that qualify for the enhanced concession can claim the GST in their next Statement of Claim and maintain the relevant documents to support the GST claims. There is no need to seek prior approval from IRAS to apply the enhanced concession.
In essence:
This enhanced concession provides a "grace period" for new funds, acknowledging that they may need time to ramp up their operations and meet the required spending thresholds.
Example: Fund meets the conditions of income tax concession at the end of second year
Let's illustrate the "enhanced administrative concession" with a practical example:
Scenario: "Innovate Singapore Fund"
Fund Type: Venture capital fund.
Income Tax Concession: A Singapore income tax concession requiring a minimum level of local spending.
Financial Year End: December 31st.
Year 1: Initial Setup and Investment
Innovate Singapore Fund is launched.
The fund focuses on identifying and investing in promising local startups.
Due to the initial setup costs and the time required to deploy capital, the fund falls short of the minimum local spending requirements by December 31st, Year 1.
Year 2: Achieving Compliance
Innovate Singapore Fund continues its investment activities and actively increases its local spending.
By December 31st, Year 2, the fund successfully meets all the conditions of the income tax concession, including the minimum local spending requirement.
GST Remission Implications:
Year 1:
Because Innovate Singapore Fund did not meet the income tax concession requirements by the end of Year 1, it cannot claim GST incurred during Year 1.
Year 2:
Thanks to the "enhanced administrative concession," since the fund met all the income tax concession conditions by the end of Year 2, it can claim the GST incurred during Year 2.
The fund can then file their GST claims with the IRAS.
Year 3:
As the fund has met the income tax concession requirements at the end of year 2, they will be able to claim GST during year 3.
Key Points Highlighted:
Grace Period: The enhanced concession provides a two-year window for funds to meet the necessary requirements.
Retroactive Claim (Year 2 Only): The concession allows for the recovery of GST incurred during the second year, but not the first.
Compliance is Essential: It's crucial for funds to meticulously track their compliance and maintain accurate records.
No Prior Approval Needed: The Fund, after it has met the income tax concession requirements, can claim the GST in their following GST filing.
E-Filing of Statement of Claims
In Singapore, the Inland Revenue Authority of Singapore (IRAS) strongly encourages and facilitates the e-filing of tax-related documents, including Statements of Claims for GST remission. Here's a summary of the e-filing process:
Key Aspects of E-Filing:
myTax Portal:
The primary platform for e-filing with IRAS is the myTax Portal. This online portal allows taxpayers, including qualifying funds, to submit their Statements of Claims electronically.
Benefits of E-Filing:
Convenience: E-filing offers convenience by allowing submissions from anywhere with internet access.
Efficiency: It streamlines the filing process, reducing paperwork and processing time.
Accuracy: Online systems often include built-in checks to minimize errors.
Accessibility: Taxpayers can access their filing records and status online.
Process Overview:
To e-file a Statement of Claims, qualifying funds must typically:
Log in to the myTax Portal using their Singpass or other authorized credentials.
Navigate to the GST section and select the option for filing a Statement of Claims.
Enter the required information, including details of the GST claims and supporting documentation.
Review and submit the completed Statement of Claims.
Receive an electronic acknowledgment of the submission.
User Guides:
IRAS provides detailed user guides and instructions on its website to assist taxpayers with the e-filing process. These guides offer step-by-step instructions and address common questions.
In essence, IRAS has implemented a robust e-filing system to simplify and enhance the tax filing experience for taxpayers in Singapore.
Online Application for GST Remission for Qualifying Funds
Here's a breakdown of how the online application process for GST remission for qualifying funds generally works:
Key Points:
Online Application:
The application process for GST remission for qualifying funds involves online submissions.
Specifically there is an online "Application for GST Remission for Qualifying Fund" that is accessible through the form.gov.sg website. This online form requires Singpass authentication.
Requirements:
Qualifying funds must meet specific criteria to be eligible for GST remission.
This typically involves satisfying conditions for income tax concessions.
Funds must be managed by a prescribed fund manager in Singapore.
Supporting Documents:
It's crucial to prepare and submit all required supporting documents. These may include:
Invoices.
Payment records.
Fund documents.
Letters of approval from relevant agencies.
Funds under S13O (formerly S13R) and S13U (formerly S13X)^ |
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Funds under S13G (formerly S13H)^ |
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Funds under S13D (formerly S13CA)^ |
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Designated Unit Trust |
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Other funds that are approved under the GST remission |
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Statement of Claims:
Once approved, qualifying funds are required to e-File a quarterly Statement of Claims to IRAS.
This allows them to claim the GST incurred.
This e-filing requires a Corppass configuration.
Where to find the online application:
The "Application for GST Remission for Qualifying Fund" is found on the form.gov.sg website.
To proceed with the online application, Singpass authentication is required.
Important Considerations:
Ensure you understand the specific requirements for your fund type.
Proper documentation is essential for a successful application.
Qualifying Funds Submitting the First Statement of Claims
When a qualifying fund in Singapore is submitting its first Statement of Claims for GST remission, there are some important points to keep in mind. Here's a breakdown of the key considerations:
Key Steps and Considerations:
Eligibility Verification:
Before submitting any claims, the fund must ensure it meets all the qualifying conditions. This includes confirming that it satisfies the requirements for the relevant income tax concessions.
Remember that the eligibility is based on the funds status at the end of the previous financial year.
Accurate Record-Keeping:
Meticulous record-keeping is essential. The fund must have valid tax invoices and supporting documents for all GST claims.
It is very important to keep all records, as IRAS may audit the records.
E-Filing via myTax Portal:
The Statement of Claims must be submitted electronically through the IRAS myTax Portal.
Ensure that the fund has the necessary Corppass configurations in place.
Understanding the Claim Period:
The Statement of Claims is filed quarterly, based on the fund's financial year-end.
The fund must understand the specific claim period for its first submission.
Documentation:
Be prepared to provide supporting documentation. This may include:
Letter of Offer from Enterprise Singapore.
Fund’s acceptance of offer.
Annual reports.
Letters of undertaking by the fund.
Administrative Concessions:
Be aware of any administrative concessions that may apply, especially for newly established funds.
In essence:
Submitting the first Statement of Claims requires careful attention to detail and adherence to IRAS guidelines. By ensuring accurate record-keeping and understanding the e-filing process, qualifying funds can successfully claim their GST remission.
Where to Find Detailed Information:
IRAS Website:
The IRAS website is the authoritative source for detailed and current information on GST regulations and guidelines. Specifically look for information relating to GST and the finance sector.
The IRAS website is the most authoritative source for details on these administrative concessions.
The IRAS website is the authoritative source for information on e-filing procedures and requirements. Look for resources related to GST and the myTax Portal.
Look for e-Tax Guides and publications related to the fund management industry.
Monetary Authority of Singapore (MAS):
The MAS also provides circulars and information regarding the fund tax incentive schemes.
Professional Advice:
Consulting with a tax professional or advisor specializing in GST and fund management is highly recommended. Firm like Bestar, publish very useful up to date information.
How Bestar can Help
Bestar plays a crucial role in assisting qualifying funds with GST remission and related tax matters in Singapore. Here's how we can help:
Key Areas of Assistance:
Eligibility Assessment:
Bestar can help funds determine their eligibility for GST remission by thoroughly assessing their compliance with the relevant income tax concession requirements.
We can provide clarity on the complex regulations and ensure that the fund meets all the necessary criteria.
Compliance Guidance:
We can provide guidance on maintaining accurate records, obtaining valid tax invoices, and adhering to IRAS guidelines.
We can help funds establish robust internal controls to ensure ongoing compliance.
Statement of Claims Preparation and Filing:
Bestar can assist with the preparation and e-filing of quarterly Statements of Claims, ensuring accuracy and completeness.
We can help avoid common errors and ensure timely submissions.
Understanding Administrative Concessions:
We can provide insights into available administrative concessions, including the "enhanced administrative concession," and help funds determine if they qualify.
We can help funds navigate the complexities of these concessions and ensure they are applied correctly.
Handling IRAS Queries and Audits:
In the event of queries or audits from IRAS, Bestar can act as intermediaries, providing expert representation and assistance.
We can help funds prepare responses and ensure that all necessary documentation is provided.
Staying Updated on Regulatory Changes:
Tax laws and regulations are constantly evolving. Bestar stays abreast of these changes and can provide timely updates and guidance to their clients.
This is very important, as IRAS regulations can be complex.
Tax Planning and Optimization:
We can help funds optimize their tax planning strategies to maximize GST remission and minimize tax liabilities.
We can provide advice on how to structure transactions and operations in a tax-efficient manner.
Training and Education:
Bestar can provide training and education to fund managers and staff on GST regulations and compliance requirements.
Benefits of Engaging Bestar:
Reduced Risk of Non-Compliance:
Expert guidance can minimize the risk of errors and penalties due to non-compliance.
Increased Efficiency:
Professional assistance can streamline the GST remission process, saving time and resources.
Peace of Mind:
Knowing that tax matters are handled by experts provides peace of mind and allows fund managers to focus on their core investment activities.
In essence, engaging Bestar is a valuable investment for qualifying funds in Singapore. Our expertise can ensure compliance, optimize tax outcomes, and provide peace of mind.
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