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GST: Guide for the Insurance Industry
IRAS e-Tax Guide
GST: Guide for the Insurance Industry
(Fourth Edition)
GST: Guide for the Insurance Industry
Published by
Inland Revenue Authority of Singapore
Published on 8 Feb 2017
First edition on 31 Mar 2014
Second edition on 14 Nov 2014
Third edition on 10 Jun 2016
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
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by
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also be obtained before any part of this publication is stored in a retrieval system of any nature.
GST: Guide for the Insurance Industry
Table of Contents
Page
1
Aim ........................................................................................................... 1
2
At a glance ................................................................................................ 1
3
Insurance Companies ............................................................................... 2
4
Reinsurance Companies......................................................................... 12
5
Insurance Intermediaries ........................................................................ 12
6
Tax Invoice ............................................................................................. 16
7
Self-Billing ............................................................................................... 17
8
Summary: GST Treatment of Insurance Products and
Brokerage/Commission .................................................................................. 19
9
Contact Information ................................................................................ 21
10
Updates and Amendments ..................................................................... 22
Appendix 1 ..................................................................................................... 23
Appendix 2 ..................................................................................................... 24
GST: Guide for the Insurance Industry
1
1 Aim
1.1 This guide explains the GST principles applicable to the insurance industry
1
.
Specifically, it highlights the GST treatment of insurance products, fees,
charges, and commissions for insurance companies, reinsurance
companies, and insurance intermediaries, such as agents and brokers.
1.2 The guide also clarifies the distinction between life business and life policy.
2 At a glance
2.1 Generally, the provision of an insurance contract by a GST-registered
insurance company in Singapore is a taxable supply of services. GST is
charged on the insurance premiums at the standard rate
2
.
2.2 Where the insurance services qualify for zero-rating as an international
service (see paragraph 3.3) or exemption from GST (see paragraph 3.1), no
GST is charged on the insurance premiums.
2.3 The terms “life business” and “general business” are used in the Insurance
Act to indicate the nature of business that insurance companies are allowed
to operate depending on the nature of the license issued. These terms are
not synonymous with and should not be confused with the terms “life policy”
and “general policy”.
2.4 Insurance companies that are in the life business may issue life policies and
long-term health and accident policies. For GST purposes, only premiums
arising from life insurance contracts are exempt from GST. Therefore, not all
policies issued by life insurance companies are exempt from GST.
1
This e-Tax guide replaces the IRAS’ e-Tax guide “GST: The Insurance Industry (Fourth Edition)”
published on 01 Oct 2012.
2
GST should be charged at the prevailing rate, which is currently at 7%.
GST: Guide for the Insurance Industry
2
3 Insurance Companies
3.1 Life Insurance
3.1.1 The provision or transfer of ownership, of a life insurance contract is exempt
from GST under paragraph 1(l) of Part I of the Fourth Schedule to the GST
Act. This exemption is not extended to brokerage services and services of
arranging for sale of life policies
3
.
3.1.2 For GST purposes, a life insurance contract refers to a contract for the
provision of a life policy within the meaning of the Insurance Act. Examples
of policies that fall within the definition of “life policy” include endowment
policies, investment-linked policies and whole life policies.
3.1.3 Policy and administration fees, which are incidental to the provision of a life
policy contract, may also be exempt.
3.1.4 As long-term personal accident or medical insurance policies (which may be
issued by a life insurance company) do not fall within the description of ‘life
policy’ in the Insurance Act, such insurance policies do not qualify for
exemption from GST.
3.1.5 Currently, all non-life riders (e.g. medical or personal accident riders)
attached to individual life policies are treated as being incidental in nature to
the main life policy. Hence, premiums paid on an individual life insurance
policy, including a personal accident, health or other general rider attached
to the main policy are wholly exempt from GST.
3.1.6 On the other hand, for a group life policy with medical and personal accident
rider issued by an insurance company, only the premiums for the life
component is exempt.
3.1.7 Life policies supplied under a contract with a person belonging outside
Singapore and directly benefiting a person belonging outside Singapore can
be zero-rated under Section 21(3)(j) of the GST Act. For “offshore” life
insurance business, “offshore” life insurance provided to persons belonging
outside Singapore can be zero-rated. However, as an administrative
concession
4
, such insurance policies provided by “offshore” life insurance
business eligible for classification as “onshore” based on guidelines set by
the Monetary Authority of Singapore (“MAS”) may be treated as exempt (and
not zero-rated) for GST purposes.
3
For more information on GST principles applicable to insurance intermediaries, such as agents and
brokers, please refer to paragraph 5.
4
Based on MAS guidelines, offshore life business is eligible for classification as onshore life business
provided it does not exceed S$5 million. Hence, this administrative concession is given to ease
compliance so that the offshore life business does not need to distinguish between zero-rated and
exempt supplies.
GST: Guide for the Insurance Industry
3
3.2 General Insurance
3.2.1 The provision of general insurance contracts is a taxable supply of services.
The GST-registered insurance company is required to charge and account
for GST at the prevailing GST rate on the general insurance premiums unless
the supply qualifies as an international service
5
and can be zero-rated.
3.2.2 Examples of general policies are motor, fire, personal accident, medical and
health, workmen’s compensation, professional indemnity, fidelity guarantee
insurance etc.
3.3 Zero-rating of Insurance Services
3.3.1 As highlighted in paragraph 2.2, the provision of direct insurance services
can be zero-rated if it falls within the description of international services
listed under Section 21(3) of the GST Act.
3.3.2 Generally, the provision of insurance services can be zero-rated if the
policyholder belongs outside Singapore and is outside Singapore at the time
the service is performed
6
. However, for certain general insurance policies
7
,
the belonging status of the insured may be relevant to determine if zero-
rating can apply.
3.3.3 On the other hand, some insurance policies can be zero-rated even though
the policyholder belongs in Singapore. Such policies include those that relate
to international transportation, export of goods, land or goods outside
Singapore.
3.3.4 The zero-rating provisions relevant to the insurance industry are listed below:
(A) Where policyholder may belong in or outside Singapore
• Section 21(3)(c)
8
– Direct insurance relating to international
transportation of goods and passengers from:
a) From a place outside Singapore to another place outside Singapore;
b) From a place in Singapore to a place outside Singapore or
c) From a place outside Singapore to a place in Singapore.
Policies that qualify for zero-rating under Section 21(3)(c) include:
a) Marine/Aviation Cargo Insurance
b) Marine/Aviation Hull Insurance
5
Under Section 21(3) of the GST Act.
6
For life policies, the insured is not regarded as a direct beneficiary for the purpose of zero-rating
under Section 21(3)(j).
7
Examples include directors’ liability insurance where the director’s personal liability is also covered.
8
Section 21(3)(c) allows the zero-rating of services (other than the letting on hire of any means of
transport) comprising the insuring or the arranging of the insurance or the arranging of the transport
of passengers or goods to which any provision of paragraphs (a) and (b) applies.
GST: Guide for the Insurance Industry
4
Only applicable for insurance purchased in respect of commercial
vessels/aircraft involved in the international transportation of goods or
passengers
9
. Hull insurance for pleasure crafts, barges, boats, etc. not
involved in international transportation will not qualify for zero-rating
and is subject to GST.
c) Travel Insurance
Only if the insurance contract is identifiable with international journeys
involving the carriage of passengers to and from outside Singapore.
Policies that do not qualify for zero-rating under Section 21(3)(c) include:
a) Insurance policies taken up by policyholders for the purpose of
overseas employment or study or
b) Health insurance policy with overseas medical coverage
As the above policies do not directly relate to the export of goods, land or
goods outside Singapore or international travel, the premiums are
standard-rated if supplied to a local policyholder
10
. The location of
coverage is not relevant in determining whether the policy can be zero-
rated.
• Section 21(3)(e) – Insurance services supplied directly in connection with
land or any improvement thereto situated outside Singapore.
For example: Insurance premiums charged for fire insurance in respect of
a property in Vietnam or insurance premiums charged for property risk
insurance in respect of a property in Malaysia
• Section 21(3)(f) – Insurance services supplied directly in connection with
goods situated outside Singapore when the services are performed.
• Section 21(3)(h) – Insurance (not reinsurance) upon or against any risks
incurred in the making of advance or the granting of credit directly relating
to –
a) the export of goods (not services) outside Singapore or
b) the supply of goods which involves the removal of goods from a place
outside Singapore to another place outside Singapore.
For example: Export credit insurance
(B) Where policyholder must belong outside Singapore for zero-rating
• Section 21(3)(g) – Insurance services supplied directly in connection
11
with goods for export outside Singapore, where the risk cover is supplied
9
With effect from 1 July 2010, hull insurance for cruise liners used only for cruises to nowhere can
be zero-rated under Section 21(3)(c).
10
See “Belonging status of your customer (an individual)” in paragraph 3.3.4(B).
11
Refer to e-tax Guide ‘Clarification on "Directly in Connection With" and "Directly Benefit"’.
GST: Guide for the Insurance Industry
5
to a person not belonging in Singapore at the time the services are
performed.
• Section 21(3)(j) – Insurance services provided under a contract with a
person who belongs outside Singapore and directly benefit
12
a person
who belongs outside Singapore and who is not in Singapore when the
insurance cover is provided. The cover must not be directly in connection
with any land or goods in Singapore.
For example: Health policy provided to policyholder who is an overseas
individual
Belonging status of your customer (an individual)
For the purpose of Section 21(3)(j), an individual belongs in Singapore if
his usual place of residence is in Singapore during the period the
insurance services are supplied.
Administratively, the Comptroller of GST regards the residential address
of an individual as his "usual place of residence". Hence, if your customer
provides a Singapore residential address, he shall be regarded as
belonging in Singapore for GST purposes.
However, if the individual stays overseas to study or work and he has
more than one residential address, the Comptroller is prepared to accept
that the individual belongs overseas if all of the following conditions are
satisfied:
a) He is absent from Singapore for a continuous period of at least one
year. It does not matter that he spends his holidays in Singapore
during that one year. During that year, his temporary return to
Singapore for vacation or other reasonable purposes is acceptable;
b) He stays at a fixed place in the overseas country and
c) Where he is working in the overseas country, his overseas assignment
must not be incidental to his employment in Singapore.
For example: student insurance policy providing insurance coverage of
more than a year while the student stays overseas
Policies that do not qualify for zero-rating under Section 21(3)(j) include:
Insurance policies taken up by local policyholders to insure against losses
to their shareholdings in overseas companies or loans provided to
overseas persons.
3.4 Time of Supply for Premiums
3.4.1 Where premiums are paid in a lump sum, output tax will be accounted for
based on the earlier of the following:
12
Refer to e-tax Guide on “GST: Clarification on ‘Directly in Connection With’ and ‘Directly Benefit’”.
GST: Guide for the Insurance Industry
6
a) When an invoice is issued or
b) When payment is received.
The issuance of any type of invoice will be an event that triggers the time of
supply. This includes a tax invoice as well as any document that serves as a
bill for payment for supplies made by a GST-registered supplier. An example
of such document would be a debit note.
3.4.2 In general, documents, such as sales order, pro-forma invoice, statement of
accounts and letter/statement of claims are not considered invoices for GST
time of supply purposes. This is because these documents are often not
billing for payments and would therefore not be treated as invoices based on
normal commercial practices. For more details, please refer to the e-Tax
Guide on “GST: Time of Supply Rules”.
3.4.3 Where premiums are in instalments, the time of supply is the earlier of:
a) The date when each instalment payment becomes due or
b) The date of payment.
3.5 Estimation of Output Tax for Premiums Collected on Behalf of the Insurance
Company
3.5.1 An insurance intermediary may collect premiums on behalf of the insurance
company from the policyholder. For GST purposes, premiums collected by
the insurance intermediary are considered as received by the insurance
company. If the tax invoice has not been issued earlier, the collection of
premiums by the insurance intermediary on behalf of the insurance company
would trigger the time of supply.
3.5.2 The insurance intermediary should then inform the insurance company on
the collection of premiums, as the insurance company is required to account
for GST on insurance premiums collected on insurance contracts that do not
qualify for exemption or zero-rating.
3.5.3 However, the insurance company may face difficulties in capturing the exact
amount of output tax in a prescribed accounting period if the insurance
intermediary does not inform the insurance company on time. In view of such
difficulties, the insurance company may apply to the Comptroller of GST in
writing for estimation of output tax under Regulation 60 of the GST (General)
Regulations.
3.5.4 Upon approval, the insurance company will be allowed to estimate whole or
a portion of the output tax payable in an accounting period based on a
formula allowed by the Comptroller. The estimated output tax for the previous
accounting period will be adjusted in the next accounting period when the tax
invoices for premiums received are issued.
3.5.5 Example: Insurance Company A collected $90,000 in premiums for the
period Jul to Sep 2016. Company A’s backlog in issuing tax invoices is one
GST: Guide for the Insurance Industry
7
month and it estimates the output tax due to the Comptroller for the last
month of the next quarter (Oct to Dec 2016) with the following formula:
Estimated output tax for Dec 2016
= Monthly average of actual premiums for previous quarter (i.e. Jul to
Sep 2016) multiplied by 1 month of backlog multiplied by prevailing
GST rate
13
(i.e. 7%)
= ($90,000/3) X 1 month X 7%
= $2,100
Assuming Company A collected S$75,000 in premiums for Oct to Nov 2016,
GST amount is $5,250.
Company A should declare in its GST return:
In Box 1: $75,000 +$30,000 (estimated) = $105,000 (Value of standard-rated
supplies)
In Box 6: $5,250 + $2,100 (estimated as above) = $7,350.
In the next quarter, Company A would have known the exact amount of
premiums and GST collected for Dec 2016 (assuming $40,000 and GST
amount: $2,800) and is required to make adjustments in the next quarter
(January to Mar 2017).
The Company is required to deduct from Box 1 ($30,000) and Box 6 ($2,100)
and add the exact amount of premiums and GST collected to Box 1 ($40,000)
and 6 ($2,800).
Company A will have to compute the amount of estimated output tax for the
month of Mar 2017 based on the monthly average of actual premiums for Oct
to Dec 2016.
3.6 Specific Issues Affecting Insurance Companies
3.6.1 Cash Payments
GST-registered insurance companies are allowed a credit for input tax
deemed incurred on the Cash Payments when the conditions listed in
paragraph 3.2 of the e-Tax guide “GST Guide on Insurance: Cash Payments
and Input Tax on Motor Car Expenses” are satisfied.
3.6.2 Input Tax on Motor Car Expenses
The insurance company is allowed to claim input tax incurred on goods or
services purchased for the purpose of its business of making taxable supplies.
A GST-registered insurance company is allowed to claim input tax incurred
on motor car expenses if all conditions listed in paragraph 4.4 of the e-Tax
13
GST rate was increased from 5% to 7% in Jul 2007.
GST: Guide for the Insurance Industry
8
guide “GST Guide on Insurance: Cash Payments and Input Tax on Motor Car
Expenses” are satisfied.
3.6.3 Premium Refunds
Insurance companies may make refunds to policyholders under certain
conditions. Some insurance companies may use the refunds to offset
premiums payable.
Generally, the insurance company should not reduce the value of insurance
services previously supplied and corresponding output tax when a refund is
made upon the occurrence of an insured event, or an event other than the
insured event, e.g. no claims being made, or termination of the policy plan
after a specified minimum number of years etc.
However, the refunds can be treated as discounts against the insurance
premiums if the payment of the refund is connected with the renewal of the
insurance contract, and the refund is offset against the premium. GST on the
subsequent premium may be accounted on the net premium payable.
3.6.4 Investment-Linked Policies (ILP)
Life insurance companies may offer ILP with a combination of protection and
investment elements. Premiums received from the policyholder are typically
invested in professionally-managed investment-linked funds (ILFs), in return
for units allocated to the policyholder.
Generally, the insurance company charges fees, such as fund management
fees, surrender fees and redemption fees, to defray its costs of administering
the ILP. Such fees and charges are separately disclosed and typically settled
via a reduction in units of ILFs allocated to the policyholder.
For GST purposes, we are prepared to treat an ILP as a single supply of life
policy and exempt the premiums from GST for the ILP on the following basis:
a) The main purpose of the policyholder is to purchase a life insurance
policy and not merely an investment product;
b) The investment element is always provided together as a package
with the life insurance contract
14
and
c) The ILP falls within the definition of a ‘life policy’ in the Insurance Act.
Similarly, fees and charges in relation with an ILP will be treated as additional
consideration for an exempt supply arising from the provision of a life
insurance contract, under paragraph 1(l) of Part I of the Fourth Schedule to
the GST Act.
14
The investment element can be considered as an enhancement to the life protection element of
the policy as it allows for the potential of higher returns to increase the cash value of the policy, as
opposed to leaving the investment decisions to the insurance company in traditional life policies.
GST: Guide for the Insurance Industry
9
3.6.5 Insurance Excess
There are some situations where the policyholder is not fully-insured and is
required to bear an amount of excess in the event of loss.
The following section describes the scenarios when the recovery of insurance
excess is treated as a supply and the corresponding GST treatment:
Scenario 1: Supplier bills the insured
When the supplier bills the policyholder for vehicle repair services, the
insured cannot claim the GST incurred if he is a non- GST registered person.
Assuming the insurance company will bear the amount of expenses
exceeding $500, the policyholder will recover $1,000 from the insurance
company. In this case, the insurance company is treated as making a Cash
Payment indemnifying the insured according to the insurance contract
15
.
Scenario 2: Supplier bills insurance company
If the insurance company contracted for the supply of 3rd party services to fulfill its
obligations under the insurance contract to the policyholder, the 3rd party would bill
the insurance company for the full value of services rendered. The insurance
company will recover the excess from the policyholder. The recovery of excess by
the insurance company is treated as a taxable supply of service and hence GST is
chargeable on the recovery of excess from the policyholder.
Whether the recovery of excess $500 should be treated as inclusive of GST or
exclusive of GST depends on terms and conditions of the insurance contract
between the policyholder and insurance company16.
15
See section 3.2 of the e-Tax Guide “GST Guide on Insurance: Cash Payments and Input Tax on
Motor Car Expenses” on conditions of claiming deemed input tax for Cash Payment.
16
For both the examples under Scenarios 2 and 3, it is assumed that the policyholder only bears
excess of $500 inclusive of GST. If the excess is inclusive of GST, GST is computed by using the
Insurance
Company
Supplier
Policyholder
Cash payment
$1,000
Excess of
$500
Tax invoice of
$1,500 (inclusive of
GST
Pays
$1,500
Supplier
Insurance
Company
Policyholder
Tax invoice of $1,500
(inclusive of GST)
Tax invoice $500
(inclusive of GST)
Pays
$1,500
GST: Guide for the Insurance Industry
10
Scenario 3: Supplier issues two invoices (where the supplier has two
contracts of services; one with the insurance company for part of the bill
payable by the insurance company and the other with the policyholder for the
amount of excess payable by the policyholder)
Feedback from the industry highlighted that it is a common market practice
for the supplier to split their bills between the insured and the insurance
company. In order not to disrupt this business practice, the supplier is allowed
to continue this practice to split the bill and issue 2 tax invoices to the
policyholder and the insurance company respectively.
When the supplier splits its bill, both bills should attract GST, as there is a
taxable supply of services provided to both the insurance company and the
policyholder. Whatever the excess amount the supplier collects from the
policyholder, the amount should be treated as inclusive of GST.
3.6.6 Recovery of Third Party Claims
Where a third party (i.e. Policyholder A) causes the damage, the insurance
company of the victim (i.e. Company Y) usually recovers the full amount or
part of the repair cost
17
from the third party or the insurance company of the
third party. Company Y is not regarded as making any supply to the third
party or his insurance company X when it recovers the cost. This is because
the payment is regarded as a form of compensation from the third party or
his insurance company.
tax fraction [i.e. GST rate / (100% + GST rate)] multiplied by the excess recovered. If it is exclusive,
GST is computed using the prevailing GST rate multiplied by the excess recovered.
17
Assumption: Both cars belonging to the victim and the party at fault are damaged. Hence, there
are two suppliers (repair workshops) involved.
Insurance
Company
Supplier
Policyholder
Tax invoice $500
(inclusive of GST)
Tax invoice
$1,000 (inclusive
of GST
Insurance
Company X
Policyholder A
(at fault)
Person B (Victim) or
Person B’s Insurance
Company Y
Insurance policy
Recovers an
agreed amount
Supplier 1
Issues tax
invoice
Issues tax
invoice &
recovers excess
of $500
Makes Cash Payment
Supplier 2
Issues tax
invoice
GST: Guide for the Insurance Industry
11
3.6.7 Recovery of Medical Expenses from Agents / Policyholders
The insurance company may require potential policyholders to undergo
medical check-ups to ascertain their risk profile and the premiums required
to underwrite the policies. The insurance company would generally bear the
medical costs of the compulsory medical check-ups undergone by the
policyholders.
However, the insurance company may recover the cost of medical check-ups
from the agent or policyholder in certain situations.
In general, the recovery of expenses is treated as a taxable supply of services
where GST is chargeable. However, where one party breaches his
contractual obligations and causes the other party to incur a loss, the
recovery of expenses is not a supply and is not subject to GST. The GST
treatment for the scenarios in which the insurance company may recover
medical expenses from the policyholder or insurance agent is shown below:
Scenario Taxable?
Reason
(a) The insurance company
unilaterally cancels the insurance
policy even though the insurance
agent did not breach any of the
terms in the agency agreement
and recovers medical expenses
from the insurance agent.
Yes The recovery of expenses
from the insurance agent did
not result from a breach of
terms of contract by the
insurance agent. Rather, it is
the unilateral decision of the
insurance company to
cancel the policy.
(b) The insurance company
cancels the insurance policy due
to fraud or misrepresentation by
the policyholder and recovers
medical expenses from the
insurance agent.
Yes The recovery of expenses
from the insurance agent did
not result from a breach of
terms of contract by the
insurance agent.
(c) The insurance agent breaches
any of his obligations under the
agency agreement with the
insurance company, resulting in a
loss to the insurance company
and the latter recovers the medical
expenses from the agent.
No The recovery of expenses
from the agent resulted from
a breach of the terms under
the agency agreement.
(d) The potential policyholder
failed to pay the first premium or
first installment of premium within
the grace period stated in letter of
acceptance and the insurance
company recovers the medical
Yes The recovery of expenses
from the insurance agent did
not result from a breach of
terms of contract by the
insurance agent. Rather, it is
the unilateral decision of the
GST: Guide for the Insurance Industry
12
expenses from the insurance
agent.
policyholder not to pay the
premiums.
(e) The policyholder decides not to
take up the policy within the free
look period after signing the policy
and the insurance company
recovers the cost of medical
checkups from the policyholder.
Yes The policyholder did not
breach any terms of the
insurance contract as he has
the right to cancel the policy
within the free look period.
4 Reinsurance Companies
4.1 The provision of general reinsurance or life reinsurance contract is an exempt
supply of financial service under the Fourth Schedule to the GST Act. Hence,
premiums arising from such reinsurance contracts placed locally are exempt
from GST.
4.2 The premiums of a reinsurance contract would qualify for zero-rating under
Section 21(3)(j) if it is a supply made ‘under a contract with’, and which
‘directly benefits’ a person belonging outside Singapore, and who is outside
Singapore when the service is performed. Hence, reinsurance premiums
received from cedants belonging outside Singapore can be zero-rated.
4.3 It should be noted that reinsurance cover is not treated as supplied directly
in connection with goods or land. Hence, the only zero-rating provision for
reinsurance cover is Section 21(3)(j). It is not necessary to ascertain if
reinsurance coverage would qualify for zero-rating under other provisions
such as Sections 21(3)(e), (f), (g) and (h).
5 Insurance Intermediaries
5.1 Commissions and Fees Received for Arranging Direct General/ Life
18
Insurance
5.1.1 Insurance companies may engage insurance intermediaries, such as agents,
brokers
19
and financial advisers
20
to solicit, sell and arrange for insurance
contracts with policyholders.
5.1.2 Generally, the commissions and fees (including profit commission, overriding
commission or other product-related payments) charged by a GST-
registered insurance intermediary for introducing and arranging direct
general or life insurance policies (“introductory services”) is subject to GST
18
As mentioned in paragraph 3.1.1, brokerage and commission arising from the arranging for the
sale of life policies is not exempt from GST.
19
The GST-registered agent/broker refers to an agent/broker who carries on a business and is
registered independently for GST purposes. An agent employed under a contract of employment
with the insurance company is an employee and is not required to register for GST.
20
Financial advisers are licensed under the Financial Advisers Act.
GST: Guide for the Insurance Industry
13
at the standard-rate if the recipient of the services (the insurance company
or policyholder depending on who the insurance intermediary has a contract
with) belongs in Singapore and at 0% if the recipient belongs outside
Singapore.
5.1.3 An insurance business is treated as belonging in Singapore when:
a) It has a business establishment or some fixed establishment in Singapore
and nowhere else;
b) It is legally constituted in Singapore (e.g. company incorporated in
Singapore) and has no business or fixed establishment in any other
country or
c) It has establishments both in Singapore and outside of Singapore but
services are most directly used or to be used by the establishment in
Singapore.
5.2 Overseas Insurance Companies with Branches in Singapore
5.2.1 In Singapore, MAS requires overseas insurance companies to set up local
branches in order to conduct insurance business in Singapore
21
. Only the
local branch that is registered with the MAS can carry on an insurance
business in Singapore. Its overseas head office or other overseas branches,
are not allowed to solicit insurance business in Singapore. Hence, the local
branch is regarded as carrying on the business of the overseas insurance
company in Singapore and therefore belongs in Singapore for GST purposes.
5.2.2 Singapore policies
Only the licensed local branch can market and sell insurance policies
covering domestic risk (“Singapore policies”) to residents in Singapore
22
.
Commissions received for providing introductory services in respect of
Singapore policies is standard-rated
23
, unless the Singapore policies qualify
for zero-rating as described in paragraph 5.2.6 below
24
.
5.2.3 Offshore policies
21
According to the Insurance Act, “insurance business in Singapore” means the business of
assuming risk or undertaking liability in Singapore under policies, and of —
(a) receiving proposals for policies in Singapore;
(b) issuing policies in Singapore or
(c) collecting or receiving premiums on policies in Singapore.
22
The local branches can only sell MAS-approved products to local policyholders and they have to
record such insurance premiums (regardless of whether the policies are underwritten by the
overseas establishment or the local branches) in their books. For definitions of ‘residents in
Singapore’, please refer to the Insurance Act.
23
This is so even if you do not liaise with the local branch in your day-to-day operations.
24
For insurance intermediaries that have sought MAS's approval to solicit Singapore insurance
business for unlicensed overseas insurance companies, such introductory services can be zero-
rated if all the conditions under Section 21(3)(j) are satisfied. This is so even if the policyholder may
be a local person. However, if your introductory services are provided to the local policyholder and
the policyholder pays you a fee, the fee will be subject to GST at the standard rate.
GST: Guide for the Insurance Industry
14
In Singapore, both the licensed local branch and the overseas insurance
company can sell policies that relate to risks outside Singapore (“offshore
policies”). Hence, when the insurance intermediary provides introductory
services for offshore policies, it is required to establish whether its
introductory services are provided to the local branch or the overseas
insurance company. Information, such as which insurance entity records the
insurance premiums in its accounting books or which entity is responsible for
paying the commission for the introductory service rendered can help to
determine this fact.
5.2.4 If the introductory services in respect of offshore policies are provided to the
local branch, the GST-registered insurance intermediary should account for
GST on its commission and fees. However, if the insurance intermediary’s
introductory service for offshore policies is provided to an overseas insurance
company
25
, the commission charged will qualify for zero-rating under Section
21(3)(j) of the GST Act.
5.2.5 It should be noted that commissions and fees charged for services provided
by the insurance intermediary are not treated as supplied directly in
connection with any land or goods.
5.2.6 Where the insurance intermediary’s brokerage services supplied involve the
arranging of insurance policies relating to international transportation of
goods or passengers, it will qualify for zero-rating under Section 21(3)(c) of
the GST Act. Generally, commission charged for the arranging of the
following policies can be zero-rated:
a) Marine cargo /marine hull insurance
b) Aviation cargo, aviation hull insurance
c) Travel insurance (which is identifiable with journeys involving carriage
of passengers to and from outside Singapore).
5.2.7 In the event that the insurance company cannot zero-rate the premiums of
the above policies, the insurance intermediary’s commission will similarly not
qualify for zero-rating.
Other non-monetary commission
5.2.8 The GST-registered insurance intermediary may receive services or goods
as commission. These are non-monetary consideration received for services
provided by the insurance intermediary. Hence, if the insurance intermediary
is GST-registered, he is also required to account for GST based on the open
market value of the goods or services received.
Lucky draws
5.2.9 Instead of commission, the GST-registered insurance intermediary may
receive a chance to participate in a lucky draw organized by the insurance
25
The contract for introductory services must not be with the local branch for zero-rating to apply.
GST: Guide for the Insurance Industry
15
company in return for meeting sales targets. He is not required to account
for GST on the value of lucky draw chance received.
5.2.10 If the insurance intermediary wins a prize through the lucky draw, the prize
is not regarded as a consideration for the services rendered by him
26
. Hence,
the GST-registered insurance intermediary is not required to account for GST
on goods or services received as prizes through lucky draws.
5.2.11 On the other hand, the GST-registered insurance company is deemed to be
making a supply of goods if the goods are given away as lucky draw prizes.
Hence, it is required to account for GST based on the open market value of
the goods unless
27
:
The cost of the gift is $200 or less; or
It had not claimed GST on the purchase or import of the goods.
5.3 Brokerage/Commission for Reinsurance Contracts
5.3.1 In inward reinsurance, reinsurance commission (including overriding
commission and profit commission) payable to the GST-registered cedant is
exempt from GST if the reinsurance company belongs in Singapore and
zero-rated if the reinsurance company belongs outside Singapore.
5.3.2 In outward reinsurance, the reinsurance commission payable to the
reinsurance company by the retrocessionaire is exempt from GST if the
retrocessionaire belongs in Singapore and zero-rated if the retrocessionaire
belongs outside Singapore.
5.3.3 If a GST-registered insurance intermediary arranges for the provision of
reinsurance contract, the commission charged by him is exempt from GST if
the recipient of his services belongs in Singapore and zero-rated if the
recipient belongs outside Singapore.
5.4 Time of Supply for Commissions and Fees
5.4.1 For commissions and fees, the insurance intermediary should account for
output tax based on the earlier of the following:
a) When an invoice
28
is issued by the GST-registered insurance
intermediary or the insurance company under self-billing arrangement
or
26
For GST purposes, there is no direct nexus between the lucky draw prize received and the services
rendered by the insurance intermediary.
27
Prior to 1 Oct 2012, if the cost of the goods given free to the insurance intermediary is not more
than $200 and the goods do not form a series or succession of gifts given to the same insurance
intermediary, no supply is treated as being made by the GST-registered insurance company.
28
Prior to 1 January 2011, the issuance of a tax invoice, and not any other type of invoice is an event
that will trigger the time of supply. With effect from 1 January 2011, the issuance of any type of
invoice will be an event that triggers the time of supply. This includes a tax invoice and any document
that serves as a bill for payment for supplies made by a GST-registered supplier. An example would
GST: Guide for the Insurance Industry
16
b) When payment is received.
5.4.2 If payment is received before an invoice is issued, a tax invoice has to be
issued within 30 days to the GST-registered insurance company from the
date the payment is received. This is because GST-registered customers
require a tax invoice to support their input tax claims.
5.4.3 When payment is regarded as received
For GST-registered insurance intermediaries that are required to pay the
gross premiums collected from policyholders (without deducting
commissions) to the insurance companies, they should account for output
tax on the commissions in the prescribed accounting period when the
commissions are received from the insurance companies, if no tax invoice
has been issued previously. A tax invoice should then be issued to the
insurance companies within 30 days from the receipt of commissions.
For GST-registered insurance intermediaries that are allowed to deduct their
commissions directly from the premiums collected before remitting the net
amount to the insurance companies, they are required to account for output
tax on the commissions once premiums have been collected from the
policyholders. A tax invoice should be issued to the insurance company
within 30 days from the receipt of premiums if it was not issued earlier.
This is because the payment of premiums by the policyholder to the
insurance intermediary is deemed as received by the insurance company.
The insurance company is regarded as having accepted the insurance
business and the service provided by the insurance intermediary is complete
once the latter receives the premiums. Hence, the insurance intermediary
would be entitled to the commission once premiums are received from the
policyholder.
6 Tax Invoice
29
6.1 It should be noted that insurance premiums and commissions are
consideration for separate supplies of services. The premium is due to the
insurance company for its supply of insurance services to the policyholder.
On the other hand, commission is consideration due to the insurance
intermediary for its supply of services (of arranging direct insurance) to the
insurance company.
be a debit note. In general, documents, such as sales order, pro-forma invoice, statement of
accounts and letter/statement of claims are not considered as invoices for GST time of supply
purposes. This is because these documents are often not billing for payments and would therefore
not be treated as invoices based on normal commercial practices.
29
For details on the particulars required on a tax invoice, refer to “GST: General Guide for
Businesses”.
GST: Guide for the Insurance Industry
17
6.2 GST on insurance premiums is based on the value of the premiums while
GST on commissions is based on the value of commissions. The calculation
of GST should not be based on the net value of the premium and commission.
6.3 There should be separate tax invoices issued by the GST-registered
insurance company to the policyholder for the premiums
30
and the GST-
registered insurance intermediary to the insurance company for the
commission charged.
6.4 The insurance intermediary may raise a debit note to the policyholder for the
collection of the insurance premium on behalf of the insurance company. As
it is the insurance company that supplies the insurance services to the
policyholder, the insurance company should issue a tax invoice to the
policyholder. Therefore, the debit note issued by the insurance intermediary
should not be mistaken as a tax invoice for GST purposes.
6.5 The insurance intermediary is advised to attach the tax invoice issued by the
insurance company to his own debit note when he bills the policyholder. The
insurance intermediary should indicate the following words on his debit
note
31
“This is not a Tax Invoice. The insurance company’s tax invoice is
attached or will be sent to you shortly.”
6.6 The insurance company may also choose to issue a receipt instead of a tax
invoice to a non-GST registered policyholder for the premium. The receipt
must be serially printed and must show the following:
Insurance company’s name and GST registration number
Date of receipt;
Total amount payable including total GST; and
The words "price payable includes GST".
The insurance company must retain a duplicate of the receipts issued.
7 Self-Billing
7.1 It is a common practice for insurance companies to determine the value of
an insurance intermediary’s commission and other compensation
32
. For
administrative ease, the insurance company may wish to adopt self-billing so
that the insurance company prepares the tax invoice, on behalf of the
insurance intermediary, for services provided by the latter.
30
Refer to Appendix 1 for a sample of the tax invoice to be issued by the insurance company.
31
Refer to Appendix 2 for a specimen of the debit note to be issued by the insurance intermediary.
32
Insurance companies would have readily available information, such as agency contracts to
determine the final value of commissions payable to the insurance intermediaries.
GST: Guide for the Insurance Industry
18
7.2 Specifically, self-billing can be used to cover transactions with GST-
registered insurance intermediaries, such as cash agents
33
as well as credit
agents and brokers
34
with principal accounts.
7.3 Self-billing can only be used after the insurance company has performed a
self-review and made a declaration that it is able to satisfy all the conditions
indicated on the ‘Checklist for Self-Review of Eligibility and Declaration on
Use of Self-Billing’.
7.4 GST-registered insurance intermediaries that do not have existing self-billing
arrangements with the GST-registered insurance companies they are acting
for, should ensure that they issue tax invoices according to rules outlined in
paragraph 5.4.3.
33
A cash agent is one who does not have a Principal’s Account (i.e. a separate bank account opened
and maintained by the agent as trustee for the insurer who is the principal). It receives payment on
the insurance premiums made to the insurance company by the policyholder and hands over all
premiums collected from the policyholder to the insurance company.
34
Credit agents and brokers refer to those that operate a Principal’s Account and receive payment
on the insurance premiums from the policyholders. They deposit the premiums collected into the
Principal’s Account after deducting the commissions due to them.
GST: Guide for the Insurance Industry
19
8 Summary: GST Treatment of Insurance Products and
Brokerage/Commission
8.1 The following table states generally the GST treatment for various types of
insurance products and the relevant zero-rating provisions. It is not meant to
be exhaustive and the insurance companies should determine the GST
treatment for their policies based on the nature of the insurance contracts
(and not merely based on the terminology used for their policies).
Type Of Insurance Policy
GST treatment for
customer belonging
In
Singapore
Outside
Singapore
Direct Insurance
Premiums
–
Life Policies
−
Life Policy - Individual
35
(e.g. endowment, whole life)
− Life Policy - Group
36
− Life Annuity
− Term Life Insurance
− Investment Linked Policy
EX ZR
[s21(3)(j)]
Premiums
-
General Insurance Policies
Workmen’s Compensation Insurance SR NA
Motor Insurance in respect of vehicles registered in
Singapore SR
−
Aviation/ Marine Hull Insurance
37
− Aviation/ Marine Cargo Insurance
38
− Travel Insurance
ZR [s21(3)(c)]
Fire and Theft
− In respect of land/goods in Singapore
− In respect of land/goods outside Singapore
SR
ZR [s21(3)(e), s21(3)(f)]
−
Public Liability Insurance
− Medical and Accident Insurance
− Professional Indemnity Insurance
− Mortgagee’s Interest Insurance
− Political Risk Insurance
SR ZR
[s21(3)(j)]
39
Reinsurance
Reinsurance Policy EX ZR
[s21(3)(j)]
35
Including personal accident or medical rider attached to main policy.
36
Excluding riders attached to the main policy, riders are standard-rated if customer belongs in
Singapore.
37
Vessel/aircraft must be used for international transportation of goods/passengers.
38
Cargo must be carried in an international voyage.
39
Customers for general policies may refer to both the policyholder and the insured depending on
the type of coverage.
GST: Guide for the Insurance Industry
20
Abbreviation:
SR – Standard-rated EX – Exempt ZR – Zero-rated NA – Not applicable
8.2 The following table states generally the GST treatment for brokerage,
commission and other fees received by insurance intermediaries for their
services.
Brokerage, commission and
other fees charged for
arranging the following
policies:
GST treatment for customer
40
belonging
In Singapore Outside Singapore
Direct Insurance
−
Aviation/ Marine Hull
− Aviation/ Marine Cargo
− Travel
ZR [s21(3)(c)] ZR [s21(3)(c)]
All other life or general
insurance products excluding
the above
SR ZR [s21(3)(j)]
41
Reinsurance
Reinsurance commission EX ZR [s21(3)(j)]
40
Customer can refer to either the insurance company or the policyholder, depending on who has
contracted for the insurance intermediary’s services.
41
Where the arranging services are zero-rated under Section 21(3)(j), the overseas customer must
be outside Singapore when the services performed.
GST: Guide for the Insurance Industry
21
9 Contact Information
9.1 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
Fax: (+65) 6351 3553
Email: gst@iras.gov.sg
GST: Guide for the Insurance Industry
22
10 Updates and Amendments
Date of
amendment Amendments made
1 14 Nov 2014 (i) Inserted paragraphs 5.1.6 to 5.1.9 (GST treatment
on non-monetary consideration received by brokers
/ agents) and 6.6 (information required on receipt
issued).
(ii) Revised paragraphs 3.3.2 and 3.3.3 (relevancy of
insured for zero-rating of general insurance policies).
(iii) Inserted footnotes 4, 6, 7, 20, 21, 25, 26 and 30.
(iv) Editorial amendments to paragraphs 2.2 and 3.1.4
and footnotes 10 and 15. Re-formatting of tables
under paragraphs 8.1 and 8.2.
2 10 Jun 2016 (i) Inserted paragraphs 5.1.2, 5.2, 5.2.1 to 5.2.4 and
footnotes 20 to 25 (belonging status of insurance
companies and introductory services provided to
overseas insurance companies with branches in
Singapore).
3 8 Feb 2017 (i) Revised paragraph 3.4.1 to remove time of supply
rules applicable to premiums prior to 1 Jan 2011.
(ii) Inserted paragraph 5.1.1 and amended paragraphs
5.1.2, 5.2.1 and footnote 24 to clarify GST treatment
of introductory services provided by insurance
intermediaries.
(iii) Revised paragraphs 5.4.1 to 5.4.3 to remove time of
supply rules applicable to commissions and fees
prior to 1 Jan 2011, and elaborate time of supply
rules for insurance intermediaries.
(iv) Revised paragraphs 7.1 to 7.4 and inserted footnote
32 to extend self-billing to cover transactions
between GST-registered insurance companies and
GST-registered credit insurance intermediaries.
(v) Inserted footnote 40 to explain the type of customers
that may contract for the insurance intermediary’s
services.
(vi) Editorial changes.
GST: Guide for the Insurance Industry
23
Appendix 1
TAX INVOICE
Date of issue: 01 Jul 2007 ABC INSURANCE COMPANY
888 Jalan Ang Teng
Singapore 560009
GST registration number: M2-1234567-1
Serial number:
Name of Policyholder
Address of Policyholder
Policy Details:
Type of Policy:
Policy Number:
Policy period:
Premium (S$)
Premium before GST: 1,000
GST @ 7%: 70
Gross Premium: 1,070
Total amount payable: 1,070
Name of Broker:
Address of Broker:
GST: Guide for the Insurance Industry
24
Appendix 2
Debit Note
Type of Policy:
Policy Number:
(Policyholder’s Name)
(Policyholder’s Address)
(Policyholder’s Address)
(Policyholder’s Address)
Broker’s Name:
Broker’s Address:
Date of Issue: 1 Jul 2007
Period of Insurance:
Description of insurance services supplied:
Gross Premium collected on behalf of insurance company ABC: S$ 1,070
This is not a Tax Invoice. The insurance company’s tax invoice is attached or will be
sent to you shortly.
