GST Guide On Reimbursement And Disbursement Of Expenses

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GST: Guide on Reimbursement and Disbursement of Expenses

IRAS e-Tax Guide
GST: Guide on Reimbursement and
Disbursement of Expenses
(Second Edition)

GST: Guide on Reimbursement and Disbursement of Expenses

Published by
Inland Revenue Authority of Singapore

Published on 9 Feb 2018
First edition on 31 May 2013

Disclaimers: IRAS shall not be responsible or held accountable in any way for any damage, loss or
expense whatsoever, arising directly or indirectly from any inaccuracy or incompleteness in the
Contents of this e-Tax Guide, or errors or omissions in the transmission of the Contents. IRAS shall
not be responsible or held accountable in any way for any decision made or action taken by you or
any third party in reliance upon the Contents in this e-Tax Guide. This information aims to provide
a better general understanding of taxpayers’ tax obligations and is not intended to comprehensively
address all possible tax issues that may arise. While every effort has been made to ensure that this
information is consistent with existing law and practice, should there be any changes, IRAS reserves
the right to vary its position accordingly.

© Inland Revenue Authority of Singapore
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GST: Guide on Reimbursement and Disbursement of Expenses
Table of Contents
Page
1
Aim .................................................................................................................... 1
2
At a glance ........................................................................................................ 1
3
Differentiating reimbursement and disbursement ............................................... 2
4
Examples differentiating between reimbursement and disbursement................. 3
5
Overview of GST treatment for reimbursement .................................................. 6
6
Recovery of expenses amounting to a supply .................................................... 8
7
Concession on claiming input tax on disallowed expenses which are subsequently
recovered ................................................................................................................ 19
8
Billing for recovery of expenses ....................................................................... 25
9
Frequently asked questions ............................................................................. 27
10 Contact Information ......................................................................................... 29
11 Updates and Amendments .............................................................................. 30
Annex 1 - Flowchart on GST treatment for recovery of expenses ............................ 31
Annex 2 – Summary of examples ............................................................................ 32

GST: Guide on Reimbursement and Disbursement of Expenses

1

Aim

1.1

This e-Tax Guide is relevant to all GST-registered businesses that incur
expenses and subsequently recover the expenses from another party such
as their employees, customers, related corporations or suppliers. It provides
clarification on the following:
a) The GST principles for differentiating between a reimbursement and
disbursement;
b) The GST treatment for reimbursement of expenses; and
c) The concession on claiming of input tax on disallowed expenses where
such expenses are recovered from another business.
It also illustrates the application of these principles on some common
business examples.

2

At a glance

2.1

The GST treatment for the recovery of expenses depends on whether the
expenses are incurred by you as a principal or an agent (i.e. incurred on
behalf of another party). The manner of invoicing alone (e.g. showing such
expenses as a separate item on the invoice) is insufficient to determine the
GST treatment of these items.

2.2

For the purpose of GST, the term “reimbursement” refers to the recovery of
an expense that you incur as a principal from another party. On the other
hand, the recovery of a payment made on behalf of another party by you as
an agent is termed as a “disbursement”. A disbursement does not constitute
a supply and hence, is not subject to GST. A reimbursement, on the other
hand, may be subject to GST if it is consideration for a supply of goods or
services.

2.3

The flowchart in Annex 1 gives an overview of the GST treatment for the
recovery of expenses.

2.4

Prior to this guide, a recovery of expense is considered as a separate supply
(i.e. reimbursement) and hence, subject to GST, as long as it does not meet
the following conditions for disbursements:
Conditions for disbursements
 The other party is responsible for paying the supplier;
 The other party knows that the goods or services would be provided by
that supplier;
 The other party authorised you to make the payment on his behalf;
 The other party is the recipient of the goods or services;
 The payment is separately itemised when you invoice the other party;
 You recover only the exact amount paid to the supplier; and
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GST: Guide on Reimbursement and Disbursement of Expenses


The goods or services paid for are clearly additional to the supplies you
make to the other party.

2.5

The GST treatment set out in this guide shall apply to recovery of expenses
that occur on or after 31 May 2013. Nevertheless, to give businesses time to
adjust to the rules stated in this guide, businesses may continue to apply the
rules stated in paragraph 2.4 up to 30 June 2013.

3

Differentiating reimbursement and disbursement

3.1

For any recovery of expenses, you will first have to establish whether the
recovery is a reimbursement or disbursement. To determine this, you should
look at whether you have acted as a principal or agent in purchasing the
goods or services and incurring the expenses in the first place.
If you incur the expenses
as a principal

If you pay the expenses
as an agent

The recovery of
expenses is

a reimbursement

a disbursement

GST treatment

The recovery of the
expenses from another
party may amount to a
supply and may be subject
to GST or exempt from
GST, as the case may be.

The recovery of expenses
does not constitute a
supply and hence will not
be subject to GST.

Input tax claim

You are entitled to claim
input tax incurred on goods
or services procured by you
if the subsequent recovery of
such expenses constitutes a
taxable supply.

You are not entitled to any
input tax claim since the
goods or services are not
supplied to you but to your
principal.

3.2

Generally, you are acting as a principal in procuring the goods or services if
you contract with the supplier in your own name or capacity.

3.3

In the event that the contractual relationship is not clear, the following set of
indicators can be used as a guide to establish if you are acting as a principal
or agent in procuring the goods or services. You should apply all the
indicators objectively, where applicable, to your transaction. You do not need
to satisfy all the indicators, however, based on the indicators applicable to
your transaction, you should determine on balance whether they point
towards you acting as a principal or agent.

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GST: Guide on Reimbursement and Disbursement of Expenses
Indicators

You are a principal if

You are an agent if

Contractual liability
and assumption of
responsibilities and
risks

You have contracted for the
supply of goods or services
in your own name or
capacity.

You have arranged for the
supply of goods or services
on behalf of another party
and you are not a party to
the contract.

Legal obligations
to make payment/
payment
arrangement

You
have
the
legal
obligation to make payment
for the goods or services.
For example, the third party
supplier’s tax invoice is
issued in your name.

You do not have the legal
obligation to pay for the
goods or services but is
authorised by another party
to make payment to the third
party supplier on his behalf.
For example, the third party
supplier’s tax invoice is
issued in the other party’s
name.

Alteration to the
nature and value
of supplies

You can alter the nature or
value of the supplies and
make decision on the value
of expense to recover.

Unless authorised to do so
by the other party, you
cannot alter the nature or
value of supplies made
between the other party and
the third party supplier.

Identities of parties
and transaction
involved

You are the only party
known to the third party
supplier; and

The third party supplier
knows the identity of the
other party; and

The other party does not
know the cost incurred by
you on the purchase of
goods or services from the
third party supplier.

The other party knows the
exact cost incurred by you
on the purchase of goods or
services from the third party
supplier.

You own the goods.

You do not own the goods
as the goods are for the
other party.

Ownership of
goods (If the
recovery relates to
goods)

3.4

The above indicators will supersede the conditions for disbursements (see
paragraph 2.4) previously published on IRAS’ website. While those
conditions have served as useful administrative guidelines, the above
indicators based on the underlying principal-agent relationship will serve
better in differentiating between a disbursement and reimbursement.

4

Examples differentiating between reimbursement and disbursement

4.1

The following business examples illustrate the application of the principles in
section 3 above in deciding whether a recovery of expenses is a
reimbursement (may or may not be subject to GST) or disbursement (not
subject to GST). In cases where treatment of the recovery is not clear, you
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GST: Guide on Reimbursement and Disbursement of Expenses
will need to examine the facts of the case, contractual obligations of all
parties involved in the arrangement and relevant GST principles to determine
the GST treatment.
Examples of disbursement
Example 1 – Recovery of costs of door gifts by events company
Company A engages an event organiser B to help organise its annual Dinner
and Dance. On the day of the event, door gifts are given away to the participants
to thank them for their support.
A ordered the gifts from Company C and instructed C to deliver them to B due
to logistical reasons. C invoiced A and requires cash on delivery. Upon receipt
of the goods, B makes the payment for the gifts and subsequently recovers the
amount from A.

4.2

In Example 1, A contracts with C for the gifts and hence, is the principal in
purchasing the gifts. B merely receives and pays for the gifts on behalf of A.
Therefore, B’s recovery of the costs of the gifts from A is a disbursement and
not subject to GST.
Example 2 – Recovery of company’s incorporation expenses
Corporate services firm D is engaged to handle the legal work pertaining to the
incorporation of Company E. Other than its service fees, D also recovers from
E a company registration fee and company name approval fee paid to
Accounting & Corporate Regulatory Authority (“ACRA”) on behalf of E.

4.3

In Example 2, the fees charged by ACRA for company registration and
company name approval are compulsorily levied on E. D is merely acting as
an agent in the payment of those fees. Therefore, D’s recovery of such
expenses is a disbursement and not subject to GST.

Example 3 – Recovery of fees for updating corporate particulars
Corporate services firm F is engaged by Company G to handle the firm’s
obligation to file annual returns, change company name, registered address
and office operating hours with ACRA.

4.4

In Example 3, G is the one required under the law to file annual returns and
inform ACRA of any changes to its corporate particulars. The fees are legally
imposed by ACRA on G and it is G’s obligation to pay. F is merely acting as
an agent in the payment of those fees and hence, F’s recovery of such fees
is a disbursement and not subject to GST.

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GST: Guide on Reimbursement and Disbursement of Expenses
Example 4 – Recovery of import GST paid on behalf of importers by freight
forwarding or logistics companies
Import GST is levied on goods imported into Singapore. In the course of
clearance, freight forwarder H who is engaged by importer I to pick up its goods
from Customs paid the import GST.

4.5

In Example 4, the goods are owned and imported by I. The import permit is
also issued in I’s name. As it is I’s obligation to pay tax on its imports, H is
merely acting as an agent in making the payment on I’s behalf. Hence, H’s
recovery from I for the tax paid is a disbursement and not subject to GST.
Example 5 – Recovery of property tax on sale of property
Company J owns several properties in Singapore. J sold one of the properties
to buyer K. On top of the property sale price, J also recovers from K a pro-rated
portion of the property tax it had already paid in advance for the entire year.

4.6

In Example 5, having purchased the property from J, K is the one liable to
pay the property tax to the authority as property tax is levied on the owner of
the property. Hence, the recovery of the pro-rated portion of property tax paid
by J for the period is a disbursement and not subject to GST.
Example 6 – Recovery of parking fine
An employee of Company L is fined for illegal parking of the company’s truck
and the fine is issued to L. Firm M, being the secretariat of L, makes payment
for the fine and recovers it from L.

4.7

In Example 6, L is the one liable to pay the fine to the authority as illegal
parking is an offence imposed on the owner of the vehicle. Hence, the
recovery of the fine paid by M is a disbursement and not subject to GST.
Examples of reimbursement
Example 7 – Recovery of transport expenses
In the course of performing their audit work, auditors from N Associates & Co.
incur transport fares. These expenses will be included in N’s billing to their
clients.

4.8

In Example 7, the auditors from N acquire the transport services as a
principal in their own capacity and are legally obliged to pay the transport
service providers. They receive and use the transport services directly in the
course of performing their work. Hence, the recovery of these expenses by
N from their clients is a reimbursement.

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GST: Guide on Reimbursement and Disbursement of Expenses
Example 8 – Recovery of property tax on lease of property
Company O leases two properties to earn rental income. The tenancy
agreements include a clause that allows O recovery of property tax from its
tenants.

4.9

In Example 8, the obligation to pay the property tax to the authority remains
with O as the property owner and hence, the recovery of the property tax
from the tenant is a reimbursement. In this case, the property tax recovered
forms part and parcel of the rental consideration. Hence, the property tax
recovered in relation to the lease of a commercial property is subject to GST
whereas property tax recovered in relation to the lease of a residential
property is exempt from GST.

4.10

More examples of reimbursement are provided in the following paragraphs.

5

Overview of GST treatment for reimbursement

5.1

For a reimbursement to be taxable, there must be an underlying supply of
goods or services. The word “supply” in its ordinary sense means “to furnish
or to serve”1. Therefore, a supply exists when there is another party to whom
the goods or services are furnished or served and when there is an
agreement to supply between that other party and the supplier, or consent
given by the other party for the goods or services, in return for a
consideration2.

5.2

Where you recover expenses incurred on goods or services which are
supplied to you to enable you to make a supply to your customer, the
reimbursement of the expenses is considered to be part of the consideration
payable by your customer for the services or goods supplied by you.

5.3

Similarly, when you are reimbursed by another party for procuring goods or
services for him, the reimbursement will constitute a supply for GST
purposes. This is notwithstanding that the reimbursement may be at cost.
Section 6 of this guide provides guidelines and clarifies the GST treatment
for reimbursements which constitute a supply.

5.4

However, there may also be situations where you seek payment from another
party for certain costs you have incurred as a principal but you are not
providing any goods or services to that party in return for the payment.
Examples of such scenarios would include recovery of payment as
compensation or recovery of regulatory penalties. A payment is considered
a compensation if for example, it results from a unilateral breach by the party
who is required to pay the compensation. If there is a written contract, you

1

Derived from UK case law Carlton Lodge Club v C & E Comrs [1974] STC 507, cited with approval
in Eastbourne Town Radio Cars Association v C & E Comrs [1998] STC 669.
2 See Charles Lim Aeng Cheng, Leung Yew Kwong and Chia-Tern Huey Min’s Goods and Services
Tax - The Law and Practice (First edition, 2002), LexisNexis, p 60 and 61.

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GST: Guide on Reimbursement and Disbursement of Expenses
should examine the contract to determine whether a payment is
compensatory in nature. For a payment to be considered as compensation,
the receiver of the compensation must not provide any goods or services in
return to the paying party.
Examples of recovery not amounting to a supply for GST purposes
Example 9 – Recovery of fine for illegal parking
Car rental Company P was fined by the traffic police for illegal parking of a car
hired to its customer. As the offence was committed during the period which the
customer hired the car, P will recover the fine from him.

5.5

In Example 9, the fine for illegal parking is levied on P as the owner of the
vehicle and P is legally liable to pay the fine. When P subsequently recovers
the fine from its customer, P is regarded as seeking compensation. Since the
recovery is compensatory in nature and no goods or services are supplied
by P to the customer in return for it, the recovery of the fine is not a supply
for GST purposes. P does not have to account for GST on the recovery.
Example 10 – Recovery of debt collection fees
Company Q defaulted on the payment for the goods supplied by Company R.
R engaged the services of a debt collector, to help recover the debt owed by Q.
Q eventually settled the debt owed to R. Additionally, R also recovered the debt
collection fees charged by the debt collector from Q.

5.6

In Example 10, engaging the debt collector to recover the debt outstanding
is an “enforcement action” taken by R; R did not supply any goods or services
to Q in return for recovering the debt collection fees payment. Accordingly,
the recovery of the debt collection fees is compensatory in nature and is not
a supply for GST purposes and R does not need to charge GST on the
recovery.
Example 11 – Recovery of damage charges
Company S rents an office space from the landlord and sublets half the space
to Company T. Under the contract, S is allowed to sublet the office space to a
third party but will be held liable for any damage to office furniture or equipment.
On one occasion, T’s employee accidentally damages one of the office
projectors and S has to pay the landlord for the damage. S subsequently
recovers the amount from T.

5.7

In Example 11, S has to pay the landlord the damage charges as S is the
party held legally liable for any damage to office equipment pursuant to the
contract. When S subsequently recovers the damage charges from T, it is
considered as compensatory in nature and is not a supply for GST purposes

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GST: Guide on Reimbursement and Disbursement of Expenses
since S does not supply any goods or services to T in return for the damage
charges recovered. S does not need to charge GST on the recovery.

6

Recovery of expenses amounting to a supply

6.1

When you seek reimbursement for the expenses incurred by you from
another party who will receive goods or services, the reimbursement will be
treated as a supply for GST purposes. You should determine, based on your
contractual agreement with them, which of the following categories your
reimbursement falls under:
a) Recovery of expense is ancillary to or form inputs to a primary supply of
goods or services; or
b) Recovery of expense is separate and not ancillary to or forming inputs to
any primary supply of goods or services.

6.2

The GST treatment for reimbursement amounting to a supply is summarised
as follows:
GST treatment for
reimbursement

(A) Recovery of expenses is ancillary to
or form inputs to a primary supply of
goods or services [see section 6(A)]







You are making a primary supply of
goods or services to your customer.
Your customer’s intention in contracting
with you is for this primary supply.
You incur expenses in the course of
providing the primary supply.
Ordinarily, you would not be incurring
and recovering these expenses on their
own if you are not making that primary
supply.
You recover the expenses as part of
the overall price that you are charging
your customer.

Examples:
 Transportation and accommodation
charges incurred in the course of
providing consultancy services
 Legal and auditing fees incurred for the
provision of management services
 Handling charges incurred for provision
of transportation services
 Freight charges incurred for supplying
goods

(B) Recovery of expenses is separate and not ancillary to or
forming inputs to any primary supply of goods/services [see
section 6(B)]




You are not making a primary supply of goods or services, for which
the expenses relate to.
You are merely procuring goods or services for another party out
of convenience etc. The other party’s intention is to obtain these
goods or services through you.
The various expenses you recover are separate and distinct from
one another and each serves its own purpose to the other party.

(i) Recovery
(100%)

at

cost

The nature of the supply will
follow that of the goods or
services you have originally
procured. However, the GST
treatment for the cost
recovery has to be assessed
on its own as the supplier
and recipient of the services
have changed.

(iii) Recovery of exempt
supplies
To qualify as an exempt
supply, the recovery must fall
within the description of goods
or services listed in the Fourth
Schedule to the GST Act:
a) Sale
and
lease
of
residential properties
b) Financial services
c) Supply
of
investment
precious metals

(ii) Recovery with a mark-up (E.g. 100% + 5% mark-up)
The GST treatment for the 100% cost recovery (i.e. original cost) is
based on the nature of the original supply [please refer to (B)(i)].

The GST treatment for the
reimbursement will follow that of
the primary supply.

The GST treatment for the mark-up is based on the separate
supply of service (e.g. arranging fees, administrative fees etc.).

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GST: Guide on Reimbursement and Disbursement of Expenses

(A)

Recovery of expenses is ancillary to or form inputs to a primary
supply

6.3

You are contracted to supply goods or services (hereafter referred to as “the
primary supply”) to your customer at an agreed consideration. You may then
incur expenses in your own capacity in the course of providing the primary
supply. Ordinarily, you would not have incurred and recovered such
expenses if you are not making the primary supply. You would also have
agreed with your customer on the recovery of such expenses and such
recoveries form part of the overall price you are charging for the primary
supply.

6.4

In such instances, the recovery of the expenses is ancillary to or form inputs
to your primary supply of goods or services to your customer. The value of
your supply to your customer will be the sum of the consideration received
for the primary supply and the costs recovered. The GST treatment for the
recovery of the expenses will generally follow that of the primary supply.

6.5

There may be scenarios where the primary supply qualifies for zero-rating
under section 21(3) of the GST Act but the recovery of the expense ancillary
to the supply has to be standard-rated as the GST law specifically excludes
the expense from zero-rating. For example, when you recover entertainment
and/or accommodation expenses incurred by the employees of your
overseas customer in Singapore as part of your primary supply of services to
your overseas customer, while the primary supply may qualify for zero-rating
under section 21(3)(j) or 21(3)(k), the recovery of the expenses has to be
standard-rated as such expenses are specifically excluded from zero-rating
under the provisions.

6.6

The manner of invoicing (e.g. expense is separately invoiced) or the invoicing
format (e.g. expense is separately itemised in the same invoice) does not
affect the GST treatment of the reimbursement.
Examples of recovery of expenses which is ancillary to or form inputs to a
primary supply
Example 12 – Recovery of overseas counsel fees
A lawyer from U Associates provides legal advice to a local client on an
Indonesian company acquisition case. U seeks counsel with an Indonesian law
firm V who provided the necessary information concerning Indonesian law and
business regulations. U includes V’s counsel fees in its billing to the client.

6.7

In Example 12, U contracts with V directly and works with the latter to obtain
the required information in order to perform its legal services to the client. In
other words, U is the principal in acquiring the services from V.

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GST: Guide on Reimbursement and Disbursement of Expenses
6.8

The subsequent recovery of overseas counsel fees by U from its local client
is a reimbursement. The counsel fee recovered forms inputs to U’s legal
services to the local client and is subject to GST. This is so, even if no GST
is charged by V to U as V is an overseas company and is not GST-registered.
Example 13 – Recovery of medical certification fees
Medical certification of victim W is required for a litigation. Lawyer X arranges
for W to be examined by a doctor, and requests the clinic to issue a medical
certification for this purpose. The doctor will invoice X for the medical check-up
fee. X will recover this fee along with his legal fees from W.

6.9

In Example 13, the recovery of the medical fee is a reimbursement as the
medical service is contracted for by X. The recovery is ancillary to X’s legal
services since X receives and uses the medical report in the course of
performing his services to W. Accordingly, the GST treatment for the recovery
follows that of the legal service provided by X to W.
Example 14 – Recovery of plan fees
Civil and structural engineer Y is engaged by a local developer to provide
engineering design and consultancy works on the construction of a building in
Singapore. As part of his work, Y is required to make submissions to the various
government agencies to obtain relevant planning approvals. The applications
require payment of plan fees to statutory boards such as the Building Control
Authority and the Urban Redevelopment Authority.

6.10

In Example 14, Y is contracted to design the plan for the construction of the
building and the submissions and payment of the plan fees are part of his
scope of work. As Y acquired the supplies from the authorities as a principal,
his subsequent recovery of plan fees is a reimbursement3. Following the GST
treatment of Y’s primary supply of design and consultancy services, which is
directly in connection with land in Singapore, the reimbursement is subject to
7% GST.
Example 15 – Recovery of handling costs incurred for the provision of
transportation services.
Z is engaged by a local wholesaler to provide transportation services to import
goods from overseas into Singapore. The service agreement also provides that
Z may recover costs incurred in relation to the transportation services, e.g.
handling costs. Z thus recovers from the wholesaler the handling costs incurred
in importing the goods into Singapore.

3

The recovery of plan fees by Y from the local developer is regarded as a reimbursement if Y is
legally liable to pay the plan fees to the authorities. However, if the developer is legally liable to
pay for the plan fees, then Y’s recovery of such fees would be regarded as a disbursement.

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GST: Guide on Reimbursement and Disbursement of Expenses
6.11

In Example 15, Z’s recovery of the handling costs from the wholesaler is a
reimbursement since Z has incurred the expenses as a principal. As the
expenses are incurred in the course of making the primary supply of
international transportation services, the GST treatment for the
reimbursement will follow that of the primary supply - both the reimbursement
and the primary supply will be zero-rated under section 21(3)(a) of the GST
Act.
Example 16 – Recovery of freight, handling and insurance charges incurred for
the sale of goods
B enters into a sale agreement which includes the delivery of goods to a customer.
The sale agreement provides that B may recover the costs it incurs for making
the delivery. B thus recovers from the customer, the international freight, handling
and insurance costs incurred in importing the goods into Singapore for the sale.

6.12

In Example 16, B’s recovery of the expenses from his customer is a
reimbursement since B has incurred the freight, handling and insurance
charges as a principal. Ordinarily, B does not provide freight services. In this
case B has provided the service to facilitate its sale of goods to the customer.
That is, the freight service is ancillary to its supply of goods to the customer.
Hence, the GST treatment for the reimbursement will follow that of the sale
of goods. If the goods are sold locally, the recovery of the expenses together
with the supply of goods, is subject to 7% GST. This is even though some of
the expenses, such as the international freight, could have been zero-rated
if supplied on its own by the freight forwarder directly.
Example 17 – Recovery of costs incurred in the provision of consultancy
services
Consultancy Company C contracts with an overseas Company D to provide
consultancy services to the latter. C engages the help of two staff from its
overseas subsidiary, for their industry expertise. C paid for the air fares, hotel
accommodation, transport, wages and entertainment expenses of the staff
during their stay in Singapore. C then recovers these expenses from D in
addition to a consultancy fee.

6.13

In Example 17, C’s recovery of the staff expenses from D is a reimbursement
since C engaged the services of its overseas subsidiary and incurred the staff
expenses as a principal. These expenses are inputs for C to provide
consultancy services to D and thus form part of the overall consideration for
the service. For this reason, the reimbursement of staff expenses should
follow that of C’s primary supply of consultancy services to D. The services
can be zero-rated under section 21(3)(j) or (k) of the GST Act since the
consultancy services is contracted with and directly benefitting D, an
overseas company, wholly in its business capacity, who is not in Singapore
at the time the services are performed.

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GST: Guide on Reimbursement and Disbursement of Expenses
Example of recovery of expenses which is ancillary to a primary supply but
subject to specific exclusion in the GST law
Example 18 – Recovery of costs incurred in the provision of training services
Company E provides training services to employees of an overseas Company F
and the employees are sent to Singapore to attend the training. E helps F to book
hotel accommodations for the employees when they are in Singapore. The hotel
bills E and E in turn recovers the hotel charges from F.

6.14

In Example 18, the primary supply of training services can be zero-rated
under section 21(3)(k) since the training services is contracted with F, an
overseas company, wholly in its business capacity and the services benefits
its employees, being persons belonging outside Singapore, wholly in their
business capacity. E’s recovery of accommodation expenses from F is a
reimbursement since E has incurred the hotel charges as a principal.
Although the hotel accommodation is ancillary to E’s supply of training
service to F, accommodation expenses incurred in Singapore are specifically
excluded 4 from the zero-rating relief provided under section 21(3)(k). As
such, the recovery of hotel charges from F is subject to 7% GST.

(B)

Recovery of expenses is separate and not ancillary to or forming inputs
to any primary supply

6.15

There may also be situations where you are not making a primary supply of
goods or services but you merely help to procure goods or services for
another party’s use out of convenience, cost savings etc. In such situations,
the various expenses you recover are separate and distinct from one another
and each serves its own purpose to the other party, i.e. they are not provided
to make, better enhance or facilitate a primary supply (if any).

6.16

In such instances, the Comptroller is prepared to treat the reimbursement as
a separate recovery of expenses and the GST treatment will depend on
whether you are recovering the expenses at cost or with a mark-up.
(i) Separate recovery of expenses at cost

6.17

If you are recovering each expense at cost, the nature of your supply to the
third party will follow that of the goods or services you originally procured. For
example, if you procure freight services for a related corporation, the nature
of your subsequent recovery of the expense at cost from the latter will still be
regarded as freight services.

6.18

Though the nature of supply remains unchanged in such reimbursement
situations, you still need to assess the GST treatment for the supply on its
own as the GST treatment may not always mirror that of the original supply.

4

Paragraph 6 of Second Schedule of the GST (International Services) Order specifically excludes
“any part of a supply comprising services relating to accommodation and entertainment” from
prescribed services which qualify for zero-rating under section 21(3)(k).

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GST: Guide on Reimbursement and Disbursement of Expenses
The GST treatment for the reimbursement may differ from the GST treatment
for the original supply due to the change in supplier or recipient. In particular,
please refer to paragraphs 6.33 to 6.43 for the GST treatment of recovery of
costs relating to an exempt supply.
Examples of separate recovery of expenses at cost
Example 19 – Recovery of courier expenses at cost from related corporations
For cost savings purpose, G Holdings Ltd has an informal arrangement with its
worldwide related corporations to procure international courier services for the
entire group as and when required. Other than this, there is no other supply
made by G to its related corporations. The courier company will provide the
services directly to the corporations and bill G. G would then recover the courier
expenses at cost from the respective corporations based on their usage.

6.19

In Example 19, as G contracts with the courier company for the courier
services as a principal, its subsequent recovery of the expense from its
related corporations is a reimbursement. The reimbursement is a separate
recovery of expenses since it does not relate to any primary supply G makes
to its related corporations. As the recovery is at cost, the nature of the supply
remains as international courier services. Accordingly, G’s recovery of the
courier charges can be zero-rated under section 21(3)(a).
Example 20 – Recovery of market research expenses at cost from related
corporations
H Holdings Ltd is the headquarters for the Asia Pacific region based in
Singapore. H has an arrangement with its Asia Pacific related corporations to
procure market research services for the entire group. Other than this, there is
no other supply made by H to its related corporations. H contracts with a
Singapore company I for the market research services and subsequently
recovers the expenses at cost from the respective corporations in equal
proportion. I charges H GST at 7% for the market services since H belongs in
Singapore.

6.20

In Example 20, as H contracts with I as a principal, its subsequent recovery
of the expenses from its related corporations is a reimbursement. The
reimbursement is a separate recovery of expenses since it does not relate to
any primary supply H makes to its related corporations. H is treated as
supplying the same market research services procured from I to its related
corporations as the recovery is at cost. However, when H recovers the market
research expenses from its related corporations, the recovery qualifies for
zero-rating under section 21(3)(j) since H’s related corporations belong
outside Singapore.

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GST: Guide on Reimbursement and Disbursement of Expenses
Example 21 – Recovery of expenses incurred in Singapore by related
corporation
An overseas company J organised a training in Singapore for 2 months and used
its related corporation K’s facilities in Singapore to conduct the training. K
subsequently recovered at cost from J for the portion of the utilities, office rental
and telecommunication services consumed by J during its training.

6.21

In Example 21, K has contracted for the rental of the office space, utilities
and telecommunication services as a principal. K’s subsequent recovery of
the expenses from J is therefore a reimbursement. As K is merely recovering
from J the cost of J’s consumption of goods (utilities and office rental) and
telecommunication services without providing anything else (i.e., there is no
primary supply), K is treated as supplying the same goods and services as
what it has procured to J.

6.22

K needs to examine the goods and services individually to determine the GST
treatment of each of the expenses recovered. If the supply of
telecommunication services relates to both local and international calls made
by J, K is required to standard-rate the portion attributable to the local calls
when it recovers the expense from J. The portion that relates to international
transmission is an international service that can be zero-rated under section
21(3)(q) of the GST Act. The supply of office space and utilities are treated
as goods in Singapore, hence, K has to standard-rate the recovery of these
expenses.
Secondment of staff

6.23

Secondment of staff refers to a situation when a staff contractually employed
by one company is supplied to another company to perform certain work
specifically assigned to them.

6.24

The secondment of staff is considered to be a supply of services for GST
purposes. Therefore, the company seconding the staff (“Seconding
Company”) has to charge GST on the value of the supply if it is GSTregistered; if it is not, it will need to assess its liability to register for GST. The
value of the supply is the amount actually charged by the Seconding
Company to the company receiving the seconded staff (“Recipient
Company”). Where the Seconding Company does not charge the Recipient
Company, the consideration for the supply is the amount of remuneration
(money or otherwise) that the Seconding Company is obliged to pay the
seconded staff but instead is paid by the Recipient Company.

6.25

In practice, it is not uncommon for a corporate group to have staff
secondment arrangements to meet the operational needs of the companies
in the group. The Recipient Company generally regards itself to have hired
the seconded staff rather than buying the services of the staff from the
Seconding Company. For such cases, the Comptroller of GST is prepared,
as an administrative concession, to treat the secondment as not constituting
a supply made by the Seconding Company and to waive the need for the
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GST: Guide on Reimbursement and Disbursement of Expenses
Seconding Company to charge and account for GST on the recovery of staff
costs if all of the following conditions are met:
(i) No secondment fees, mark-up, handling charges or administrative fees
are levied by the Seconding Company;
(ii) Both the Seconding Company and Recipient Company are related within
the meaning of section 6 of the Companies Act5;
(iii) The staff is seconded to one company only at any one time6;
(iv) The Recipient Company exercises exclusive control over the allocation
and performance of the duties of the staff during the period of
secondment7; and
(v) The Seconding Company does not claim any input tax directly relating to
the secondment of staff8.
6.26

On the other hand, if any of the above conditions are not satisfied, GST has
to be charged on the full value of staff cost recoverable by the Seconding
Company (e.g. salaries, CPF contribution, medical benefits and other related
staff expenses) and any handling charges or administrative fees imposed by
the Seconding Company.
Example 22 – Recovery of seconded staff cost
Company L seconded its staff to its subsidiary company N. L did not charge N
any secondment fees; it merely recovered the seconded staff’s salary and
related fringe benefits (e.g. accommodation costs) at cost from N. L did not claim
any input tax incurred on the accommodation provided to the staff.

Under section 6 of the Company Act, “Where a corporation —
(a) is the holding company of another corporation;
(b) is a subsidiary of another corporation; or
(c) is a subsidiary of the holding company of another corporation,
that first-mentioned corporation and that other corporation shall for the purposes of this Act be
deemed to be related to each other”.
6 The above administrative concession is not intended for a case where the staff is assigned to
perform services for several companies and the staff cost is allocated to the various companies
receiving the services. In such cases, the staff cannot be described as being on secondment.
7 In a secondment, the staff continues to be legally employed by the Seconding Company but reports
to the Recipient Company. In some situations, the Recipient Company reimburses the Seconding
Company the salaries and other related expenses of the staff. In other situations, the Recipient
Company may pay the staff his salaries and related expenses directly. In substance, the Recipient
Company becomes a substitute employer for the staff. Hence, the Recipient Company must have
exclusive control over the allocation and performance of the duties of the staff during the period of
secondment.
8 Since the secondment of staff is treated as not a supply under the administrative concession, input
tax that directly relates to the secondment of staff should not be claimed. Examples of input tax that
should not be claimed would include tax incurred on fringe benefits for the seconded staff such as
accommodation and course fees.
5

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GST: Guide on Reimbursement and Disbursement of Expenses
6.27

In Example 22, L and N are related corporations and L did not claim any input
tax directly relating to the secondment of staff (i.e. accommodation fee). If N
also has exclusive control over the allocation and performance of the duties
of the seconded staff during the period of secondment, L’s recovery of
seconded staff cost from N can qualify for the administrative concession and
GST need not be charged on the recovery. The recovery will be treated as
not a supply for GST purposes.
(ii) Separate recovery of expenses with a mark-up

6.28

If you impose a mark-up9 for any additional service that you provide to the
party whom you are recovering the expenses from, you are to segregate the
mark-up from the recovery of the expenses and apply the appropriate GST
treatment to each component.

6.29

For example, you recover from your customer, expenses incurred with a 5%
mark-up,
(a) Cost recovery of the expenses (100%) – GST treatment based on
paragraphs 6.17 to 6.22; and
(b) Mark-up (5%) – GST treatment based on the separate supply of
administrative, arranging or facilitation service.
Examples of separate recovery of expenses with a mark-up
Example 23 – Recovery of freight charges from a local company
Company O used Company P’s account with its freight forwarder to import some
goods. The freight forwarder billed P for the international freight service, which P
in turn recovered from O with an additional $50 arranging fee.

6.30

In Example 23, the freight service is regarded as being contractually supplied
to P as a principal since the standing account with the freight forwarder is
P’s. Hence, P’s subsequent recovery of the expense from O is a
reimbursement. In this case, P is regarded as making 2 separate supplies to
O – international freight service (i.e. the 100% cost recovery) and arranging
service (i.e. $50 mark-up). The international freight service is zero-rated
under section 21(3)(a) of the GST Act. Similarly, the arranging service for the
international freight can also be zero-rated under section 21(3)(c) of the GST
Act.
Example 24 – Recovery of expenses incurred in Singapore by overseas related
corporation’s staff
Overseas company Q’s staff would be in Singapore for a business trip. For
convenience, Q requested its local related corporation R to make the necessary
arrangements. R contracted for and paid for various expenses for Q’s staff
(including air tickets, accommodation, local transportation, food and
entertainment). R subsequently recovered the individual expenses from Q with a
5% mark-up.

9

The mark-up may be reflected as an administrative fee, arranging fee, facilitating fee etc. in the
billing.

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GST: Guide on Reimbursement and Disbursement of Expenses
6.31

In Example 24, R’s subsequent recovery of the various expenses from Q is
a reimbursement since R contracted for them as a principal. In this case, R
is treated as making a cost recovery for the various expenses and supplying
a separate arranging service (i.e. the 5% mark-up) to Q.

6.32

For the cost recovery, R needs to examine the individual goods and services
supplied to determine the respective GST treatment. The supply of air tickets
is an international service that is zero-rated under section 21(3)(a) of the GST
Act. The accommodation is a supply of goods in Singapore and is thus
subject to 7% GST. The local transportation, food and entertainment are also
subject to 7% GST as they directly benefit Q’s staff who was physically in
Singapore at the time the goods or services were consumed or performed.
R’s arranging service can be zero-rated under section 21(3)(j) of the GST
Act, since the arranging service directly benefits Q who belongs in a country
outside Singapore and the arranging service itself is not supplied directly in
connection with any land or goods in Singapore.
(iii)

6.33

Separate recovery of expenses which are originally exempt
supplies

The recovery of expenses which are originally exempt supplies may not be
exempt. For the recovery to qualify as an exempt supply, the recovery of the
expenses must fall within the description of goods or services listed in Part I
of the Fourth Schedule to the GST Act. The three categories of exempt
supplies are sale and lease of residential properties, financial services and
the supply of investment precious metals.
Sale and lease of residential properties

6.34

The sale and lease of residential properties, specifically “the grant,
assignment or surrender of any interest in or right over or any licence to
occupy” such properties are exempt from GST under paragraph 2 of Part I of
the Fourth Schedule. Hence, a separate recovery of costs in relation to
supplies of residential properties would be exempt from GST if it qualifies
under this provision, even in the absence of a formal sales contract or lease
agreement.
Examples of separate recovery of rental costs of residential properties
Example 25 – Recovery of staff accommodation costs from a related corporation
Local Company S leases 10 apartments in Singapore from a landlord to
accommodate its own staff and the expatriate staff of its related corporation T.
The landlord invoices S for rental of all the apartments on a monthly basis. S in
turn recovers at cost from T the rental for the 6 apartments occupied by T’s staff.

6.35

In Example 25, S contracts with the landlord directly as a principal for the
rental of the 10 apartments and in turn, grants T a right for T’s staff to occupy
6 apartments. Hence, S’s recovery of costs from T in relation to the 6
apartments can be exempt from GST.
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GST: Guide on Reimbursement and Disbursement of Expenses
Example 26 – Recovery of rental cost from employee
Landlord charges Company U the following on a monthly basis:
Bare rent
= $3,000
Rental of furniture and fittings
= $3,000
Total rental
= $6,000
Annual value in the valuation list
Value of exempt supply per month

= $24,000
= 1/12 x $24,000
= $2,000
As U only subsidises its employee’s rental up to a cap of $5,000, U thus
recovers the balance amount of $1,000 from its employee every month.

6.36

In Example 26, U contracts with the landlord directly as a principal for the
rental of furnished residential apartment and in turn, grants its employees the
right to use the apartment. U subsidises the rental which comprises both the
rental of furniture and fittings and the apartment. When U recovers $1,000,
part of the recovery is attributable to the rental of the furniture and fittings
(taxable) and part of it to the rental of apartment (exempt). U should use the
following formula to arrive at the taxable portion of the subsidised rental:
Open Market Rental (i.e. total rental) – 1/12 OF AV
= $6,000 - $2,000
= $4,000 -- [A]
[A] - represents the taxable value of the furniture and fittings in a situation
of open market rental (i.e. rental is not subsidised)
[A]/Open Market Rental = $4,000/$6,000 = 2/3

6.37

Hence, when U recovers $1,000 from its employee every month, 2/3 of
$1,000 should be taxable; with the remaining portion to be treated as an
exempt supply. U is thus required to charge and account for GST on:
2/3 X $1,000 = $666.67
Provision of financial services

6.38

Most exempt financial services must be provided by the actual service
provider in order to qualify for GST exemption. That being the case, when
the originally exempt consideration charged by the actual service provider
(e.g. the bank, life insurer, etc.) is subsequently recovered by its customer
from the customer’s related company, the recovery would become taxable.

6.39

Some examples are the recovery of:


Fee charged for the issuance of a letter of credit



Life insurance premium
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GST: Guide on Reimbursement and Disbursement of Expenses


Fees charged by a person carrying on the credit card operation

Examples of separate recovery of exempt financial services
Example 27 – Recovery of fee incurred on issuance of letter of credit
Local Company V used Company W’s letter of credit facility with the bank due to
the latter’s better credit standing. The bank issued the letter of credit (“LC”) and
invoiced W for the fee on issuance of the LC. W recovered the fee from V at cost.

6.40

In Example 27, the fee charged by the bank to W for issuance of the LC is
exempt under paragraph 1(d) of Part I of the Fourth Schedule to the GST
Act. However, when W recovers the LC fee at cost from V, paragraph 1(d)
cannot apply since W is not the one issuing the LC. Thus, W’s recovery of
the LC fee from V is subject to 7% GST.
Example 28 – Recovery of life insurance premium
Company X, a holding company, purchased a group life insurance policy from an
insurance company for its own and its local subsidiaries’ employees. X invoiced
its subsidiaries for the portion of the insurance premium attributable to the
employees under the subsidiaries headcount.

6.41

In Example 28, the insurance services are contractually supplied to X as a
principal as X is the policyholder. Hence, X’s recovery of the premiums from
the respective subsidiaries is a reimbursement.

6.42

The premium charged by the insurance company to X is exempt under
paragraph 1(l) of Part I of the Fourth Schedule. However, when X recovers
the premiums from its local subsidiaries, paragraph 1(l) cannot apply since X
is not making a “provision of life insurance contract”. X’s recovery of the
premium from the local subsidiaries is thus subject to 7% GST.

7

Concession on claiming input tax on disallowed expenses which are
subsequently recovered

(A)

Claiming input tax on regulation 26 expenses incurred for related
corporations

7.1

Input tax incurred on expenses which fall within the description of regulation
26 of the GST (General) Regulations10 are not allowable. Further, regulation
25(3) provides that input tax on:

10

Regulation 26 of GST (General) Regulations provides that input tax on the following expenses
are disallowed:
(a) club subscription fee;
(b) medical and accident insurance;
(c) medical expenses;

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GST: Guide on Reimbursement and Disbursement of Expenses
(i)

family benefits;

(ii)

medical and accident insurance premium; and

(iii)

medical expenses;

incurred for the directors and officer of the company, persons engaged in the
management of the company, and the directors, officers or employees of a
related corporation as defined in section 4 of the Companies Act11 are also
disallowable.
7.2

The above means that you cannot claim the input tax on the expenses
incurred for your own employees and the employees of your related
corporation. Even when you recover the expenses from your employees or
related corporation and the recovery is subject to GST, strictly, you are not
allowed to claim the GST incurred on those expenses12. In addition, your
related corporation cannot claim the GST on-charged by you as they will
similarly be blocked by regulation 26.

7.3

However, as a concession, the Comptroller will allow you to claim in full the
input tax on the expenses incurred for your related corporation’s employees
if:
(a)
you recover the expenses in full from your related corporation;
However, if you recover only a portion of the expenses incurred, you
can only claim input tax to the extent of the portion recovered from
your related corporation.
For example, if you recover only 50% of the expenses incurred, you
can only claim 50% of the input tax incurred.
(b)

the recovery is not ancillary to any primary supply made by you
to your related corporation; and
If the recovery is ancillary to a primary supply, the concession is not
available to you. Please see paragraph 7.7 for further information.

(c)

your related corporation is registered for GST.

(d) family benefits; and
(e) any transaction involving betting, sweeptakes, lotteries, fruit machines or games of chance.
11 Section 4 of the Companies Act makes reference to section 6 of the same Act for the meaning of
“related corporation”. Section 6 deems corporations which are a holding company of another,
subsidiary of another and subsidiaries of the same holding company to be “related corporations”
for the purpose of the Companies Act. See footnote 3.
12 If you are recovering from the employees the expenses relating to family benefits, you will be
allowed to claim the GST incurred on such expenses (in proportion to the amount of expenses
being recovered).

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7.4

To enjoy the concession, you must hence:
(a)

maintain the relevant documents to support that the expenses were
incurred by you as a principal (e.g. tax invoices issued by the supplier
are addressed to you);

(b)

be able to segregate the GST incurred on the expenses relating to the
employees of your related corporation from those relating to your own
employees even if the expenses are billed in a single invoice to you
by the supplier. For example, the insurance company issued a single
tax invoice to you for group medical insurance bought by you for your
employees and employees of your related corporation;

(c)

where you are only recovering a portion of the expense from your
related corporation, ensure that you will only claim GST to the extent
covered by the on-charging; and

(d)

inform your related corporation that you will be the party to claim the
GST incurred on the expense and your related corporation will not
claim the GST charged by you when you recover the expense from it.
In billing your related corporation, you should denote on your invoice
to it that the GST chargeable is not claimable as input tax.

7.5

Even if you do not avail yourself to the concession, you must still account for
GST when you recover the expenses from your related corporation.
However, your related corporation will not be allowed to claim input tax credit
for the GST charged by you.

7.6

Businesses should only avail themselves to the concession if they are able
to comply with the requirements in 7.4 (a) to (d). In addition, if in the course
of our audit, a business applying the concession is found to have claimed
more input tax than it should or if its related corporation is found to have
claimed the GST charged by it, the business will not be allowed to continue
enjoying the concession. Penalties will also be imposed on the input tax overclaimed.
Disallowed expenses recovered that is ancillary to a primary supply

7.7

If the recovery of the expenses is ancillary to a primary supply of services or
goods which you are providing to the related corporation, the concession will
no longer apply to you. For example, if you are supplying management
services to your related corporation and the recovery of the expenses is
ancillary to the supply of the management services, you will not be allowed
to claim the input tax on the expenses. You will be required to account for
GST on the consideration (including the recovery of the expenses) that you
receive from your related corporation for the management services. Your
related corporation will be allowed to claim input tax for the GST charged by
you (subject to meeting all the conditions for claiming input tax) as what it
receives is the management services and not supplies of a nature blocked
under regulation 26.

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Examples of claiming of input tax on regulation 26 expenses
Example 29 – Recovery of medical and accident insurance premium
Y Holdings Pte Ltd arranges to purchase medical and accident insurance for
its own employees as well as all the employees of its local GST-registered
subsidiary, Z. Y invoices Z for the portion of the insurance premium attributable
to the employees under Z’s headcount with GST charged.
Scenario A: Y does not provide any other services to Z. It merely helps to
purchase the medical and accident insurance and will recover the expense at
cost from Z.
Scenario B: The above service is provided as part of Y’s management services
to Z. The cost is recovered when Y charges a lump sum management fee to Z.

7.8

7.9

7.10

7.11

In Example 29, Y is disallowed from claiming the input tax incurred on the
medical and accident insurance purchased for both Y’s own employees and
the employees of Z. This is because it is provided under regulation 25(3) of
the GST (General) Regulations that employees of a related corporation as
defined in section 4 of the Companies Act are deemed to be persons
employed by the company. Consequently, input tax incurred for both Y’s
employees and Z’s employees are disallowed under regulation 26 of the GST
(General) Regulations.
Scenario A
While input tax incurred on the insurance for Z’s employees is blocked under
the GST law, as a concession, Y is allowed to claim the input tax incurred on
the premium for Z’s employees when it recovers the insurance premium from
Z.
Y’s subsequent recovery of the insurance premiums from Z is to be standardrated whether or not Y claimed input tax under the concession. On the other
hand, Z is disallowed from claiming the input tax for the GST charged by Y
since the insurance is for its own employees.
Scenario B
Y would not be able to enjoy the above concession. It is not allowed to claim
the input tax on all the medical and insurance premiums including those
relating to Z’s employees. On the other hand, since Z is receiving
management services from Y, it can claim the input tax incurred subject to
the input tax claiming rules.
Example 30 – Recovery of medical insurance premium co-funded
Co A contracts with an insurance company for medical insurance coverage for its
employees. A co-funds 50% of the medical insurance premium for its employees
and recovers the remaining 50% from its employees.

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GST: Guide on Reimbursement and Disbursement of Expenses
7.12

In Example 30, A needs to charge GST on the 50% medical insurance
premium recovered from its employees. It is however disallowed from
claiming any input tax incurred on the medical insurance premium, including
the 50% portion recovered from its employees. This is because input tax
incurred on medical insurance premium for employees is disallowed under
regulation 26 of the GST (General) Regulations.

(B)

Claiming input tax on regulation 27 expenses

7.13

Under regulation 27 of the GST (General) Regulations13, input tax incurred
on the costs and running expenses relating to a motor car (except for Qplated cars with COE issued before 1 April 2008) used by a business are not
allowable. Hence, under the law, you cannot claim input tax on expenses you
incurred in relation to a motor car, whether or not you are using the motor
car.

7.14

However, as a concession, the Comptroller will allow you to claim in full the
input tax incurred on the motor car expenses if:
(a)

you recover the expenses in full from another party; and
However, if you recover only a portion of the motor car expenses
incurred, you can only claim input tax to the extent of the portion
recovered.
For example, if you recover only 50% of the motor car expenses
incurred, you can only claim 50% of the input tax incurred.

(b)

the recovery is not ancillary to any primary supply made by you to
the other party; and
If the recovery is ancillary to a primary supply, the concession is not
available to you.

(c)
7.15

13

the other party is registered for GST.

To enjoy the concession, you must hence:
(a)

maintain the relevant documents to support that the motor car
expenses were incurred by you as a principal (e.g. tax invoices issued
by the supplier are addressed to you);

(b)

be able to segregate the GST incurred on the expenses relating to the
other party from those relating to you even if the expenses are billed
in a single invoice to you by the supplier. For example, a car rental
company issued a single tax invoice to you for rental fees relating to
three motor cars rented by you for use by your related corporation and
you;

Regulation 27 of GST (General) Regulations disallowed input tax incurred by a taxable person on:
a) the supply or importation of a motor car; or
b) the supply or importation of goods or supply of services, used by him directly in connection
with a motor car.

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GST: Guide on Reimbursement and Disbursement of Expenses
(c)

where you are only recovering a portion of the motor car expense from
another party, ensure that you will only claim GST to the extent
covered by the on-charging; and

(d)

when you recover the expense from the other party, denote on your
invoice that the GST charged is not claimable as input tax. For related
corporations, also inform your related corporations that you will be the
party to claim the GST incurred on the expense and your related
corporations will not claim the GST charged by you when you recover
the expense from them.

7.16

Even if you do not avail yourself to the concession, you must still account for
GST when you recover the expenses from the other party. The other party
will not be allowed to claim input tax credit for the GST charged by you as
the GST is still considered as input tax incurred on motor car expenses (i.e.
blocked under regulation 27).

7.17

Businesses should only avail themselves to the concession if they are able
to comply with the requirements in 7.15 (a) to (d). In addition, if in the course
of our audit, a business applying the concession is found to have claimed
more input tax than it should, the business will not be allowed to continue
enjoying the concession. Penalties will also be imposed on the input tax overclaimed.
Examples of claiming of input tax on expenses relating to a motor car
Example 31 – Recovery of car rental fees
Company B and Company C are related corporations. As B has a standing
arrangement with a car rental company, it hires a motor car from the car rental
company for C’s use in Singapore. The car rental company charges B for the
car rental fees and B recovers the fees from C at cost. B does not provide any
other services to C.

7.18

In Example 31, B cannot claim input tax incurred on the car rental as it is
blocked under regulation 27 (being supply of services directly in connection
with a motor car). When B recovers the car rental fees from C, it is required
to standard-rate the supply. C will similarly be disallowed under regulation 27
from claiming the input tax incurred on the car rental billed by B. However,
as a concession, B can claim input tax incurred on the car rental since it
recovers the same expenses from C.
Example 32 – Recovery of parking expenses
Company D incurs parking expenses of $749 (GST-inclusive) and subsequently
recovers 50% of the parking expenses, i.e. $374.50 from a local GST-registered
related corporation E as the parking lot is also used by E.

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GST: Guide on Reimbursement and Disbursement of Expenses
7.19

In Example 32, D cannot claim input tax on the full parking expenses since
the parking expenses are incurred directly in relation to a motor car. When D
subsequently recovers 50% of the expenses from E, it is required to account
for output tax of $24.50 (7/107 of $374.50). E will similarly be disallowed from
claiming the input tax incurred on the parking expenses billed by D under
regulation 27. However, as a concession, the Comptroller will allow D to claim
input tax (i.e. $24.50) on the portion of parking expenses recovered from E.

8

Billing for recovery of expenses

8.1

The earlier sections have explained and illustrated through various examples
the GST treatment for the recovery of expenses. This section shows through
illustrations what businesses should observe when billing to recover
expenses from other parties.
Example 33 – Disbursement Case
Company F provides maintenance service to Company G for $1,000 and
charges GST of $70. The invoice is addressed to G but c/o G’s consultant,
Company H. H pays the bill and invoices G to recover the amount. In the same
invoice, H also includes its fee of $1,500 for the consultancy services it provides
to G.

8.2

In Example 33, H should charge and account GST of $105 (7% GST x
$1,500) for the consultancy services rendered to G. The value of supply of
$1,500 and GST of $105 must be shown clearly on the tax invoice. As for the
recovery of payment made to F on G’s behalf, H can reflect the total figure,
i.e. $1,070 on the same invoice. H should not show the breakdown of $1,000
and GST $70 since the recovery is a disbursement. H should attach F’s tax
invoice to G to enable G to claim the input tax incurred. H may present the
charges for its supplies of services and recovery of expenses on its tax
invoices in the following manner:
Company H’s Tax Invoice
to Company GGG
Consultancy services
GST @ 7%
Subtotal
Recovery of payment made
to Company F
(See attached invoice)
Total

$1,500
$ 105
$1,605

$1,070
$2,675

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GST: Guide on Reimbursement and Disbursement of Expenses
Example 34 – Reimbursement of expenses as part of a primary supply
In the course of providing consultancy services to Company I, Company J
engages Company K to provide interpretation services. K invoices J $1,000 and
GST of $70 for its services. J in turn invoices I $1,500 and GST of $105 for its
consultancy services and $1,070 (inclusive of GST) for the costs incurred on
interpretation services.

8.3

In Example 34, J contracts with K for the interpretation services as a principal
as part of its supply of consultancy services to I. Hence, J can claim the input
tax of $70 charged by K but should also charge and account for GST when it
recovers the costs from I. J may present the charges for its supplies of
services on its tax invoice to I in the following manner:
Company J P/L’s Tax invoice
To Company III
Consultancy services
Interpretation services
Subtotal
GST @ 7%
($105 + $70)
Total

8.4

$1,500
$1,000
$2,500
$ 175
______
$2,675

In the event that J recovers the interpretation service fee from I at a mark-up
of, say 10%, GST would be chargeable on $1,100 (i.e. $1,000 + 10%). The
total GST to be accounted would be $182 ($105 + $77).

Example 35 – Reimbursement of expenses which are directly supplied by the
third party supplier and the break-down of cost and mark-up is provided
Company L provides a one-off arranging service to its overseas head office,
Company M, to arrange for hotel accommodation for M’s director during his visit
to Singapore. The hotel bills L for the hotel accommodation, food and
beverages, internet charges and IDD call charges. L subsequently recovers the
expenses incurred from M plus a 10% mark-up.

8.5

In Example 35, L contracts as a principal with the hotel for the hotel
accommodation and hence, the recovery is a reimbursement. Since there is
no primary supply being provided by L to M, L can be regarded as making a
separate recovery of expenses from M and supplying the same goods and
services to M as originally procured from the hotel.

8.6

In this case, L’s recovery of the expenses from M is subject to 7% GST. The
accommodation is a supply of goods in Singapore, the food and beverages
and the internet charges directly benefit and are consumed by M’s director
who is in Singapore at the time of consumption, and thus must be standardrated. The IDD calls and the 10% mark-up charged to M for the arranging
services on the other hand may qualify for zero-rating under section 21(3)(q)
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GST: Guide on Reimbursement and Disbursement of Expenses
and 21(3)(j) respectively. L may present its recovery of the various expenses
on its tax invoice to M in the following manner:
Company L P/L’s Tax invoice
To Company M
Hotel accommodation
Food and beverages
Internet usage charges
Subtotal
GST @ 7%

$1,000
$ 450
$ 50
$1,500
$ 105

Total inclusive of 7 % GST

$1,605

Subject to GST @ 0%
IDD calls
Arranging service (10%
mark-up on $1,600)
Total bill payable

9

$ 100
$ 160
$1,865

Frequently asked questions
Strict pass-through costs

9.1

Question 1: A Singapore group service provider (“Singapore provider”)
contracted with a third-party firm to acquire information services for two of its
related companies. Payment was made by the group service provider direct
to the third-party firm. The Singapore provider subsequently entered into a
written agreement with its two related companies that requires them to
assume all contractual obligations and liabilities arising from the contract
entered into between itself and the third party firm. The costs to be onward
charged to its related companies qualify as strict pass-through costs14 and
will be passed on without a mark-up. When the Singapore provider recovers
the payment made from its related companies, is the recovery a
reimbursement or disbursement for GST purposes?
Answer 1: Since the Singapore provider entered into the contract with the
third-party firm in its capacity as a principal, for GST purposes, we will treat
the cost recovery as a reimbursement. This is regardless of the fact that the
Singapore provider is taken to be a paying agent for transfer pricing purposes
and the transaction qualifies as strict pass-through costs.

9.2

Question 2: A Singapore group service provider (“Singapore provider’)
helped arrange and pay for the costs of engaging a third-party firm to provide
various corporate secretarial services to its related companies. The
Singapore provider is not a party to the contract and is merely making

See IRAS’ webpage: www.iras.gov.sg > Businesses > Companies > Working out Corporate
Income Taxes > Specific topics > Transfer Pricing > Other Issues.

14

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GST: Guide on Reimbursement and Disbursement of Expenses
payments on behalf of its related companies. The Singapore provider
subsequently passes on the related costs to its related companies without a
mark-up. The costs qualify as strict pass-through costs. When the Singapore
provider recovers the payment made from its related companies, is the
recovery a reimbursement or disbursement for GST purposes?
Answer 2: In this scenario, as the Singapore provider is not a party to the
contract with the third-party firm, it is merely acting as an agent in the
payment of fees and hence, the cost recovery is treated as a disbursement,
for GST purposes.

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GST: Guide on Reimbursement and Disbursement of Expenses

10

Contact Information

10.1

For enquiries on this e-tax guide, please contact:
Goods & Services Tax Division
Inland Revenue Authority of Singapore
55 Newton Road
Singapore 307987
Tel: 1800 356 8633
Email: gst@iras.gov.sg

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GST: Guide on Reimbursement and Disbursement of Expenses
11

Updates and Amendments
Date of
amendment
1

9 Feb 2018

Amendments made


Inserted footnotes 3, 9 and 12, amended footnote 14



Editorial amendments

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GST: Guide on Reimbursement and Disbursement of Expenses
Annex 1 - Flowchart on GST treatment for recovery of expenses
Recovery of Expenses

Are you acting as a
principal or agent in
procuring the goods or
services?
[see para 3.3]
Agent

Principal

Disbursement
Are you supplying goods
or services to another
party in return for the
reimbursement? [see
para 5.1 to 5.4]

Not a Supply
 No GST

Yes

No

Recovery of expenses
amounting to a supply
[see section 6]

Recovery of expenses not
amounting to a supply
[see para 5.5 to 5.7]

Expense recovered is
ancillary to or form
inputs to a primary
supply?
Yes [see section 6(A)]

The GST treatment for the
reimbursement will follow
that of the primary supply.

No GST

No [see section 6(B)]

(i) Recovery at cost
The nature of the supply will follow
that of the goods or services you have
originally procured.
However, the GST treatment for the
cost recovery has to be assessed on its
own as the supplier and recipient of
the services have changed.

(iii) Recovery of exempt supplies
To qualify as an exempt supply, the recovery
must fall within the description of goods or
services listed in the Fourth Schedule to the
GST Act:
a) Sale and lease of residential properties
b) Financial services
c) Supply of investment precious

(ii) Recovery with a mark-up
The GST treatment for the 100% cost recovery
(i.e. original cost) is based on the nature of the
original supply [please refer to (i)]
The GST treatment for the mark-up is based on
the separate supply of service (e.g. arranging fees,
administrative fees etc.).

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GST: Guide on Reimbursement and Disbursement of Expenses
Annex 2 – Summary of examples
Scenario

GST Treatment

Examples of disbursement (Pg 4-5)
Example 1 –
Recovery of
costs of door
gifts by events
company

Company A engages an event
organiser B to help organise its
annual Dinner and Dance. On the
day of the event, door gifts are given
away to the participants to thank
them for their support.
A ordered the gifts from Company C
and instructed C to deliver them to B
due to logistical reasons. C invoiced
A and requires cash on delivery.
Upon receipt of the goods, B makes
the payment for the gifts and
subsequently recovers the amount
from A.

A contracts with C for the gifts and
hence, is the principal in purchasing
the gifts. B merely receives and
pays for the gifts on behalf of A.
Therefore, B’s recovery of the costs
of the gifts from A is a disbursement
and not subject to GST.

Example 2 –
Recovery of
company’s
incorporation
expenses

Corporate services firm D is
engaged to handle the legal work
pertaining to the incorporation of
Company E. Other than its service
fees, D also recovers from E a
company registration fee and a
company name approval fee paid to
ACRA on behalf of E.

The fees charged by ACRA for
company registration and company
name approval are compulsorily
levied on E. D is merely acting as
an agent in the payment of those
fees. Therefore, D’s recovery of
such expenses is a disbursement
and not subject to GST.

Example 3 –
Recovery of
fees
for
updating
corporate
particulars

Corporate services firm
engaged by Company G to
the firm’s obligation to file
returns, change company
registered address and
operating hours with ACRA.

F is
handle
annual
name,
office

G is the one required under the law
to file annual returns and inform
ACRA of any changes to its
corporate particulars. The fees are
legally imposed by ACRA on G and
it is G’s obligation to pay. F is
merely acting as an agent in the
payment of those fees and hence,
F’s recovery of such fees is a
disbursement and not subject to
GST.

Example 4 –
Recovery of
import
GST
paid on behalf
of importers by
freight
forwarding or
logistics
companies

Import GST is levied on goods
imported into Singapore. In the
course
of
clearance,
freight
forwarder H who is engaged by
importer I to pick up its goods from
Customs paid the import GST.

The goods are owned and imported
by I. The import permit is also
issued in I’s name. As it is I’s
obligation to pay tax on its imports,
H is merely acting as an agent in
making the payment on I’s behalf.
Hence, H’s recovery from I for the
tax paid is a disbursement and not
subject to GST.

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GST: Guide on Reimbursement and Disbursement of Expenses
Example 5 –
Recovery of
property
tax
on sale of
property

Company J owns several properties
in Singapore. J sold one of the
properties to buyer K. On top of the
property sale price, J also recovers
from K a pro-rated portion of the
property tax it had already paid in
advance for the entire year.

Having purchased the property
from J, K is the one liable to pay the
property tax to the authority as
property tax is levied on the owner
of the property. Hence, the recovery
of the pro-rated portion of property
tax paid by J for the period is a
disbursement and not subject to
GST.

Example 6 – An employee of Company L is fined
Recovery of for illegal parking of the company’s
parking fine
truck and the fine is issued to L. Firm
M, being the secretariat of L, makes
payment for the fine and recovers it
from L.

L is the one liable to pay the fine to
the authority as illegal parking is an
offence imposed on the owner of
the vehicle. Hence, the recovery of
the fine paid by M is a disbursement
and not subject to GST.

Examples of reimbursement (Pg 5-6)
Example 7 – In the course of performing their
Recovery of audit work, auditors from N
transport
Associates & Co. incur transport
expenses
fares. These expenses will be
included in N’s billing to their clients.

The auditors from N acquire the
transport services as a principal in
their own capacity and are legally
obliged to pay the transport service
providers. They receive and use the
transport services directly in the
course of performing their work.
Hence, the recovery of these
expenses by N from their clients is
a reimbursement.

Example 8 –
Recovery of
property
tax
on lease of
property

The obligation to pay the property
tax to the authority remains with O
as the property owner and hence,
the recovery of the property tax
from the tenant is a reimbursement.
In this case, the property tax
recovered forms part and parcel of
the rental consideration. Hence, the
property tax recovered in relation to
the lease of a commercial property
is subject to GST whereas property
tax recovered in relation to the
lease of a residential property is
exempt from GST.

Company O leases two properties to
earn rental income. The tenancy
agreements include a clause that
allows O recovery of property tax
from its tenants.

Examples of recovery not amounting to a supply for GST purposes (Pg 7)
Example 9 – Car rental Company P was fined by The fine for illegal parking is levied
Recovery of the traffic police for illegal parking of on P as the owner of the vehicle and
a car hired to its customer. As the P is legally liable to pay the fine.

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GST: Guide on Reimbursement and Disbursement of Expenses
fine for illegal offence was committed during the When P subsequently recovers the
parking
period which the customer hired the fine from its customer, P is
car, P will recover the fine from him. regarded
as
seeking

compensation. Since the recovery
is compensatory in nature and no
goods or services are supplied by P
to the customer in return for it, the
recovery of the fine is not a supply
for GST purposes. P does not have
to account for GST on the recovery.
Example 10 –
Recovery of
debt collection
fees

Company Q defaulted on the
payment for the goods supplied by
Company R. R engaged the
services of a debt collector, to help
recover the debt owed by Q. Q
eventually settled the debt owed to
R. Additionally, R also recovered the
debt collection fees charged by the
debt collector from Q.

Engaging the debt collector to
recover the debt outstanding is an
“enforcement action” taken by R; R
did not supply any goods or
services to Q in return for
recovering the debt collection fees
payment. Accordingly, the recovery
of the debt collection fees is
compensatory in nature and is not a
supply for GST purposes and R
does not need to charge GST on
the recovery.

Example 11 –
Recovery of
damage
charges

Company S rents an office space
from the landlord and sublets half
the space to Company T. Under the
contract, S is allowed to sublet the
office space to a third party but will
be held liable for any damage to
office furniture or equipment. On
one occasion, T’s employee
accidentally damages one of the
office projectors and S has to pay
the landlord for the damage. S
subsequently recovers the amount
from T.

S has to pay the landlord the
damage charges as S is the party
held legally liable for any damage to
office equipment pursuant to the
contract. When S subsequently
recovers the damage charges from
T, it is considered as compensatory
in nature and is not a supply for
GST purposes since S does not
supply any goods or services to T in
return for the damage charges
recovered. S does not need to
charge GST on the recovery.

Examples of recovery of expenses which is ancillary to or form inputs to a primary
supply (Pg 9-11)
Example 12 –
Recovery of
overseas
counsel fees

A lawyer from U Associates
provides legal advice to a local client
on
an
Indonesian
company
acquisition case. U seeks counsel
with an Indonesian law firm V who
provided the necessary information
concerning Indonesian law and
business regulations. U includes V’s
counsel fees in its billing to the
client.

U contracts with V directly and
works with the latter to obtain the
required information in order to
perform its legal services to the
client. In other words, U is the
principal in acquiring the services
from V.
The subsequent recovery of
overseas counsel fees by U from its
local client is a reimbursement. The
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GST: Guide on Reimbursement and Disbursement of Expenses
counsel fee recovered forms inputs
to U’s legal services to the local
client and is subject to GST. This is
so, even if no GST is charged by V
to U as V is an overseas company
and is not GST-registered.
Example 13 –
Recovery of
medical
certification
fees

Medical certification of victim W is
required for a litigation. Lawyer X
arranges for W to be examined by a
doctor, and requests the clinic to
issue a medical certification for this
purpose. The doctor will invoice X
for the medical check-up fee. X will
recover this fee along with his legal
fees from W.

The recovery of the medical fee is a
reimbursement as the medical
service is contracted for by X. The
recovery is ancillary to X’s legal
services since X receives and uses
the medical report in the course of
performing his services to W.
Accordingly, the GST treatment for
the recovery follows that of the legal
service provided by X to W.

Example 14 – Civil and structural engineer Y is
Recovery of engaged by a local developer to
plan fees
provide engineering design and
consultancy
works
on
the
construction of a building in
Singapore. As part of his work, Y is
required to make submissions to the
various government agencies to
obtain relevant planning approvals.
The applications require payment of
plan fees to statutory boards such
as the Building Control Authority
and the Urban Redevelopment
Authority.

Y is contracted to design the plan
for the construction of the building
and the submissions and payment
of the plan fees are part of his scope
of work. As Y acquired the supplies
from the authorities as a principal,
his subsequent recovery of plan
fees is a reimbursement. Following
the GST treatment of Y’s primary
supply of design and consultancy
services, which is directly in
connection with land in Singapore,
the reimbursement is subject to 7%
GST.

Example 15 –
Recovery of
handling
charges
incurred
for
the provision
of
transportation
services.

Z is engaged by a local wholesaler
to provide transportation services to
import goods from overseas into
Singapore. The service agreement
also provides that Z may recover
costs incurred in relation to the
transportation
services,
e.g.
handling costs. Z thus recovers from
the wholesaler the handling costs
incurred in importing the goods into
Singapore.

Z’s recovery of the handling costs
from
the
wholesaler
is
a
reimbursement since Z has
incurred the expenses as a
principal. As the expenses are
incurred in the course of making the
primary supply of international
transportation services, the GST
treatment for the reimbursement
will follow that of the primary supply
- both the reimbursement and the
primary supply will be zero-rated
under section 21(3)(a) of the GST
Act.

Example 16 –
Recovery of
freight,
handling and

B enters into a sale agreement B’s recovery of the expenses from
which includes the delivery of goods his customer is a reimbursement
to a customer. The sale agreement since B has incurred the freight,
provides that B may recover the

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GST: Guide on Reimbursement and Disbursement of Expenses
insurance
costs it incurs for making the
charges
delivery. B thus recovers from the
incurred
for customer, the international freight,
the sale of handling and insurance costs
goods
incurred in importing the goods into
Singapore for the sale.

handling and insurance charges as
a principal. Ordinarily, B does not
provide freight services. In this case
B has provided the service to
facilitate its sale of goods to the
customer. That is, the freight
service is ancillary to its supply of
goods to the customer. Hence, the
GST
treatment
for
the
reimbursement will follow that of the
sale of goods. If the goods are sold
locally, the recovery of the
expenses together with the supply
of goods, is subject to 7% GST.
This is even though some of the
expenses, such as the international
freight, could have been zero-rated
if supplied on its own by the freight
forwarder directly.

Example 17 –
Recovery of
costs incurred
in
the
provision
of
consultancy
services

C’s recovery of the staff expenses
from D is a reimbursement since C
engaged the services of its
overseas subsidiary and incurred
the staff expenses as a principal.
These expenses are inputs for C to
provide consultancy services to D
and thus form part of the overall
consideration for the service. For
this reason, the reimbursement of
staff expenses should follow that of
C’s primary supply of consultancy
services to D. The services can be
zero-rated under section 21(3)(j) or
(k) of the GST Act since the
consultancy services is contracted
with and directly benefitting D, an
overseas company, wholly in its
business capacity, who is not in
Singapore at the time the services
are performed.

Consultancy Company C contracts
with an overseas Company D to
provide consultancy services to the
latter. C engages the help of two
staff from its overseas subsidiary,
for their industry expertise. C paid
for
the
air
fares,
hotel
accommodation, transport, wages
and entertainment expenses of the
staff during their stay in Singapore.
C then recovers these expenses
from D in addition to a consultancy
fee.

Example of recovery of expenses which is ancillary to a primary supply but subject to
specific exclusion in the GST law (Pg 12)
Example 18 –
Recovery of
costs incurred
in
the
provision
of

Company E provides training
services to employees of an
overseas Company F and the
employees are sent to Singapore to
attend the training. E helps F to

The primary supply of training
services can be zero-rated under
section 21(3)(k) since the training
services is contracted with F, an
overseas company, wholly in its
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GST: Guide on Reimbursement and Disbursement of Expenses
training
services

book hotel accommodations for the
employees when they are in
Singapore. The hotel bills E and E in
turn recovers the hotel charges from
F.

business capacity and the services
benefits its employees, being
persons
belonging
outside
Singapore, wholly in their business
capacity.
E’s
recovery
of
accommodation expenses from F is
a reimbursement since E has
incurred the hotel charges as a
principal. Although the hotel
accommodation is ancillary to E’s
supply of training service to F,
accommodation expenses incurred
in Singapore are specifically
excluded from the zero-rating relief
provided under section 21(3)(k). As
such, the recovery of hotel charges
from F is subject to 7% GST.

Examples of separate recovery of expenses at cost (Pg 13-14)
Example 19 –
Recovery of
courier
expenses at
cost
from
related
corporations

For cost savings purpose, G
Holdings Ltd has an informal
arrangement with its worldwide
related corporations to procure
international courier services for
the entire group as and when
required. Other than this, there is
no other supply made by G to its
related corporations. The courier
company will provide the
services
directly
to
the
corporations and bill G. G would
then
recover
the
courier
expenses at cost from the
respective corporations based on
their usage.

As G contracts with the courier
company for the courier services as
a principal, its subsequent recovery
of the expense from its related
corporations is a reimbursement.
The reimbursement is a separate
recovery of expenses since it does
not relate to any primary supply G
makes to its related corporations.
As the recovery is at cost, the
nature of the supply remains as
international
courier
services.
Accordingly, G’s recovery of the
courier charges can be zero-rated
under section 21(3)(a).

Example 20 –
Recovery of
market
research
expenses at
cost
from
related
corporations

H Holdings Ltd is the headquarters
for the Asia Pacific region based in
Singapore. H has an arrangement
with its Asia Pacific related
corporations to procure market
research services for the entire
group. Other than this, there is no
other supply made by H to its related
corporations. H contracts with a
Singapore company I for the market
research services and subsequently
recovers the expenses at cost from
the respective corporations in equal
proportion. I charges H GST at 7%

As H contracts with I as a principal, its
subsequent recovery of the expenses
from its related corporations is a
reimbursement. The reimbursement is
a separate recovery of expenses since
it does not relate to any primary supply
H makes to its related corporations. H
is treated as supplying the same
market research services procured
from I to its related corporations as the
recovery is at cost. However, when H
recovers
the
market
research
expenses from its related corporations,
the recovery qualifies for zero-rating
under section 21(3)(j) since H’s related

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GST: Guide on Reimbursement and Disbursement of Expenses
for the market services since H corporations
belongs in Singapore.
Singapore.
Example 21 –
Recovery of
expenses
incurred
in
Singapore by
related
corporation

An overseas company J organised
a training in Singapore for 2 months
and used its related corporation K’s
facilities in Singapore to conduct the
training. K subsequently recovered
at cost from J for the portion of the
utilities,
office
rental
and
telecommunication
services
consumed by J during its training.

belong

outside

K has contracted for the rental of the
office
space,
utilities
and
telecommunication services as a
principal. K’s subsequent recovery of
the expenses from J is therefore a
reimbursement. As K is merely
recovering from J the cost of J’s
consumption of goods (utilities and
office rental) and telecommunication
services without providing anything
else (i.e., there is no primary supply), K
is treated as supplying the same goods
and services as what it has procured to
J.

K needs to examine the goods and
services individually to determine
the GST treatment of each of the
expenses recovered. If the supply
of telecommunication services
relates
to
both
local
and
international calls made by J, K is
required to standard-rate the
portion attributable to the local calls
when it recovers the expense from
J. The portion that relates to
international transmission is an
international service that can be
zero-rated under section 21(3)(q) of
the GST Act. The supply of office
space and utilities are treated as
goods in Singapore, hence, K has
to standard-rate the recovery of
these expenses.
Secondment of staff (Pg 15-16)
Example 22 –
Recovery
of
seconded staff
cost

Company L seconded its staff to its
subsidiary company N. L did not
charge N any secondment fees; it
merely recovered the seconded
staff’s salary and related fringe
benefits (e.g. accommodation
costs) at cost from N. L did not
claim any input tax incurred on the
accommodation provided to the
staff.

L and N are related corporations
and L did not claim any input tax
directly relating to the secondment
of staff (i.e. accommodation fee). If
N also has exclusive control over
the allocation and performance of
the duties of the seconded staff
during the period of secondment,
L’s recovery of seconded staff cost
from N can qualify for the
administrative concession and GST
need not be charged on the
38

GST: Guide on Reimbursement and Disbursement of Expenses
recovery. The recovery will be
treated as not a supply for GST
purposes.
Examples of separate recovery of expenses with a mark-up (Pg 16-17)
Example 23 –
Recovery
of
freight charges
from a local
company

Company O used Company P’s
account
with
its
freight
forwarder to import some
goods. The freight forwarder
billed P for the international
freight service, which P in turn
recovered from O with an
additional $50 arranging fee.

The freight service is regarded as
being contractually supplied to P as
a principal since the standing
account with the freight forwarder is
P’s. Hence, P’s subsequent
recovery of the expense from O is a
reimbursement. In this case, P is
regarded as making 2 separate
supplies to O – international freight
service (i.e. the 100% cost
recovery) and arranging service
(i.e. $50 mark-up). The international
freight service is zero-rated under
section 21(3)(a) of the GST Act.
Similarly the arranging service for
the international freight can also be
zero-rated under section 21(3)(c) of
the GST Act.

Example 24 –
Recovery
of
expenses
incurred
in
Singapore by
overseas
related
corporation’s
staff

Overseas company Q’s staff would
be in Singapore for a business trip.
For convenience, Q requested its
local related corporation R to make
the necessary arrangements. R
contracted for and paid for various
expenses for Q’s staff (including air
tickets, accommodation, local
transportation,
food
and
entertainment). R subsequently
recovered the individual expenses
from Q with a 5% mark-up.

R’s subsequent recovery of the
various expenses from Q is a
reimbursement since R contracted
for them as a principal. In this case,
R is treated as making a cost
recovery for the various expenses
and supplying a separate arranging
service (i.e. the 5% mark-up) to Q.
For the cost recovery, R needs to
examine the individual goods and
services supplied to determine the
respective GST treatment. The
supply of air tickets is an
international service that is zerorated under section 21(3)(a) of the
GST Act. The accommodation is a
supply of goods in Singapore and is
thus subject to 7% GST. The local
transportation,
food
and
entertainment are also subject to
7% GST as they directly benefit Q’s
staff who was physically in
Singapore at the time the goods or
services were consumed or
performed. R’s arranging service
can be zero-rated under section
39

GST: Guide on Reimbursement and Disbursement of Expenses
21(3)(j) of the GST Act, since the
arranging service directly benefits
Q who belongs in a country outside
Singapore and the arranging
service itself is not supplied directly
in connection with any land or
goods in Singapore.
Examples of separate recovery of rental costs of residential properties (Pg 17-18)
Example 25 –
Recovery
of
staff
accommodatio
n costs from a
related
corporation

Local Company S leases 10
apartments in Singapore from a
landlord to accommodate its
own staff and the expatriate staff
of its related corporation T. The
landlord invoices S for rental of
all the apartments on a monthly
basis. S in turn recovers at cost
from T the rental for the 6
apartments occupied by T’s
staff.

S contracts with the landlord
directly as a principal for the rental
of the 10 apartments and in turn,
grants T a right for T’s staff to
occupy 6 apartments. Hence, S’s
recovery of costs from T in relation
to the 6 apartments can be exempt
from GST.

Example 26 – Landlord charges Company U
Recovery
of the following on a monthly basis:
rental cost from
Bare rent
employee

U contracts with the landlord
directly as a principal for the rental
of furnished residential apartment
and in turn, grants its employees
the right to use the apartment. U
subsidises the rental which
comprises both the rental of
furniture and fittings and the
apartment. When U recovers
$1,000, part of the recovery is
attributable to the rental of the
furniture and fittings (taxable) and
part of it to the rental of apartment
(exempt). U should use the
following formula to arrive at the
taxable portion of the subsidised
rental:

= $3,000
Rental of furniture and fittings
= $3,000
Total rental
= $6,000

Annual value in the valuation list
= $24,000
Value of exempt supply per
month
= 1/12 x $24,000
= $2,000

As U only subsidises its Open Market Rental (i.e. total
employee’s rental up to a cap of rental) – 1/12 OF AV
$5,000, U thus recovers the = $6,000 - $2,000
balance amount of $1,000 from = $4,000 -- [A]
its employee every month
[A] - represents the taxable value
of the furniture and fittings in a
situation of open market rental (i.e.
rental is not subsidised)
[A]/Open Market Rental
= $4,000/$6,000
= 2/3
40

GST: Guide on Reimbursement and Disbursement of Expenses

Hence, when U recovers $1,000
from its employee every month, 2/3
of $1,000 should be taxable; with
the remaining portion to be treated
as an exempt supply. U is thus
required to charge and account for
GST on:
2/3 X $1,000 = $666.67
Examples of separate recovery of exempt financial services (Pg 19)
Example 27 –
Recovery of fee
incurred
on
issuance
of
letter of credit

Local
Company
V
used
Company W’s letter of credit
facility with the bank due to the
latter’s better credit standing.
The bank issued the LC and
invoiced W for the fee on
issuance of the LC. W
recovered the fee from V at cost.

The fee charged by the bank to W
for issuance of the LC is exempt
under paragraph 1(d) of Part I of the
Fourth Schedule to the GST Act.
However, when W recovers the LC
fee at cost from V, paragraph 1(d)
cannot apply since W is not the one
issuing the LC. Thus, W’s recovery
of the LC fee from V is subject to 7%
GST.

Example 28 –
Recovery of life
insurance
premium

Company
X,
a
holding
company, purchased a group
life insurance policy from an
insurance company for its own
and its local subsidiaries’
employees. X invoiced its
subsidiaries for the portion of
the
insurance
premium
attributable to the employees
under
the
subsidiaries
headcount.

The insurance services
are
contractually supplied to X as a
principal as X is the policyholder.
Hence, X’s recovery of the
premiums from the respective
subsidiaries is a reimbursement.
The premium charged by the
insurance company to X is exempt
under paragraph 1(l) of Part I of the
Fourth Schedule. However, when X
recovers the premiums from its
local subsidiaries, paragraph 1(l)
cannot apply since X is not making
a “provision of life insurance
contract”. X’s recovery of the
premium from the local subsidiaries
is thus subject to 7% GST.

Examples of claiming of input tax on regulation 26 expenses (Pg 22-23)
Example 29 –
Recovery
of
medical
and
accident
insurance
premium

Y Holdings Pte Ltd arranges to
purchase medical and accident
insurance for its own employees
as well as all the employees of
its
local
GST-registered
subsidiary, Z. Y invoices Z for
the portion of the insurance
premium attributable to the

Y is disallowed from claiming the
input tax incurred on the medical
and accident insurance purchased
for both Y’s own employees and the
employees of Z. This is because it
is provided under regulation 25(3)
of the GST (General) Regulations
that employees of a related
41

GST: Guide on Reimbursement and Disbursement of Expenses
employees under Z’s headcount corporation as defined in section 4
with GST charged.
of the Companies Act are deemed
to be persons employed by the
Scenario A: Y does not provide company. Consequently, input tax
any other services to Z. It merely incurred for both Y’s employees
helps to purchase the medical and Z’s employees are disallowed
and accident insurance and will under regulation 26 of the GST
recover the expense at cost (General) Regulations.
from Z.
Scenario B: The above service
is provided as part of Y’s
management services to Z. The
cost is recovered when Y
charges
a
lump
sum
management fee to Z.

Scenario A
While input tax incurred on the
insurance for Z’s employees is
blocked under the GST law, as a
concession, Y is allowed to claim
the input tax incurred on the
premium for Z’s employees when it
recovers the insurance premium
from Z.
Y’s subsequent recovery of the
insurance premiums from Z is to be
standard-rated whether or not Y
claimed input tax under the
concession. On the other hand, Z is
disallowed from claiming the input
tax for the GST charged by Y since
the insurance is for its own
employees.
Scenario B
Y would not be able to enjoy the
above concession. It is not allowed
to claim the input tax on all the
medical and insurance premiums
including those relating to Z’s
employees. On the other hand,
since Z is receiving management
services from Y, it can claim the
input tax incurred subject to the
input tax claiming rules.

Example 30 –
Recovery
of
medical
insurance
premium
cofunded

Co A contracts with an
insurance company for medical
insurance coverage for its
employees. A co-funds 50% of
the medical insurance premium
for its employees and recovers
the remaining 50% from its
employees.

A needs to charge GST on the 50%
medical
insurance
premium
recovered from its employees. It is
however disallowed from claiming
any input tax incurred on the
medical
insurance
premium,
including
the
50%
portion
recovered from its employees. This
is because input tax incurred on
42

GST: Guide on Reimbursement and Disbursement of Expenses
medical insurance premium for
employees is disallowed under
regulation 26 of the GST (General)
Regulations.
Examples of claiming of input tax on expenses relating to a motor car (Pg 24-25)
Example 31 – Company B and Company C are B cannot claim input tax incurred on
Recovery of car related corporations. As BBB the car rental as it is blocked under
rental fees
has a standing arrangement regulation 27 (being supply of

with a car rental company, it
hires a motor car from the car
rental company for C’s use in
Singapore. The car rental
company charges BBB for the
car rental fees and BBB
recovers the fees from C at cost.
B does not provide any other
services to C.

services directly in connection with
a motor car). When B recovers the
car rental fees from C, it is required
to standard-rate the supply. C will
similarly be disallowed under
regulation 27 from claiming the
input tax incurred on the car rental
billed by B. However, as a
concession, B can claim input tax
incurred on the car rental since it
recovers the same expenses from
C.

Example 32 – Company D incurs parking
Recovery
of expenses of $749 (GSTparking
inclusive) and subsequently
expenses
recovers 50% of the parking

D cannot claim input tax on the full
parking expenses since the parking
expenses are incurred directly in
relation to a motor car. When D
expenses, i.e. $374.50 from a subsequently recovers 50% of the
local GST-registered related expenses from E, it is required to
corporation E as the parking lot account for output tax of $24.50
was also used by E.
(7/107 of $374.50). E will similarly
be disallowed from claiming the
input tax incurred on the parking
expenses billed by D under
regulation 27. However, as a
concession, the Comptroller will
allow D to claim input tax (i.e.
$24.50) on the portion of parking
expenses recovered from E.

Billing for recovery of expenses (Pg 25-27)
Example 33 – Company
F
provides H should charge and account GST
Disbursement
maintenance
service
to of $105 (7% GST x $1,500) for the
Case
Company G for $1,000 and consultancy services rendered to

charges GST of $70. The
invoice is addressed to G - but
c/o G’s consultant, Company H.
H pays the bill and invoices G to
recover the amount. In the
same invoice, H also includes
its fee of $1,500 for the

G. The value of supply of $1,500
and GST of $105 must be shown
clearly on the tax invoice. As for the
recovery of payment made to F on
GGG’s behalf, H can reflect the
total figure, i.e. $1,070 on the same
invoice. H should not show the
43

GST: Guide on Reimbursement and Disbursement of Expenses
consultancy services it provides breakdown of $1,000 and GST $70
to G.
since
the
recovery
is
a
disbursement. H should attach F’s
tax invoice to G to enable G to claim
the input tax incurred.
Example 34 –
Reimbursement
of expenses as
part of a primary
supply

In the course of providing
consultancy
services
to
Company I, Company J
engages Company K to provide
interpretation
services.
K
invoices J $1,000 and GST of
$70 for its services. J in turn
invoices I $1,500 and GST of
$105 for its consultancy
services and $1,070 (inclusive
of GST) for the costs incurred
on interpretation services.

J contracts with K for the
interpretation
services
as a
principal as part of its supply of
consultancy services to I. Hence J
can claim the input tax of $70
charged by K but should also
charge and account GST when it
recovers the costs from I.
In the event that J recovers the
interpretation service fee from I at a
mark-up of, say 10%, GST would
be chargeable on $1,100 (i.e.
$1,000 + 10%). The total GST to be
accounted would be $182 ($105 +
$77).

Example 35 –
Reimbursement
of
expenses
which
are
directly supplied
by the third party
supplier and the
break-down of
cost and markup is provided

Company L provides a one-off
arranging
service
to
its
overseas head office, Company
M, to arrange for hotel
accommodation for M’s director
during his visit to Singapore.
The hotel bills L for the hotel
accommodation, food and
beverages, internet charges
and IDD call charges. L
subsequently recovers the
expenses incurred from M plus
a 10% mark-up.

L contracts as a principal with the
hotel for the hotel accommodation
and hence, the recovery is a
reimbursement. Since there is no
primary supply being provided by L
to M, L can be regarded as making
a separate recovery of expenses
from M and supplying the same
goods and services to M as
originally procured from the hotel.
In this case, L’s recovery of the
expenses from M is subject to 7%
GST. The accommodation is a
supply of goods in Singapore, the
food and beverages and the
internet charges directly benefit and
are consumed by M’s director who
is in Singapore at the time of
consumption, and thus must be
standard-rated. The IDD calls and
the 10% mark-up charged to M for
the arranging services on the other
hand may qualify for zero-rating
under section 21(3)(q) and 21(3)(j)
respectively.

44



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