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Major Importer Scheme (MES)

The Major Exporter Scheme (MES) in Singapore eases cash flow for businesses with substantial imports and exports, allowing import of non-dutiable goods without paying GST and zero-rated purchases, with compliance requirements and conditions.

Overview

The Major Exporter Scheme (MES) is a strategic initiative aimed at enhancing the liquidity of businesses heavily involved in the import and export of goods. Under standard regulations, companies are required to pay Goods and Services Tax (GST) upfront for imports, only to later claim a refund from the Inland Revenue Authority of Singapore (IRAS). This can strain the cash flow, particularly for businesses that predominantly export goods. At BluTrust Pte. Ltd., we specialize in helping businesses navigate the complexities of MES, ensuring seamless accounting, corporate secretarial, and tax compliance.

Benefits of MES

When approved for MES, businesses can import non-dutiable goods without the immediate burden of GST. Additionally, since July 1, 2006, these companies can also benefit from GST suspension on goods moved from a Zero GST warehouse.

Eligibility Criteria for MES

To qualify for MES, your business must meet the following conditions:

– Be registered for GST

– Maintain active operations and financial solvency

– Engage in or plan to engage in importing goods for business purposes

– Have zero-rated supplies constituting more than 50% of total supplies or exceed S$10 million in value over the past year. Note: Certain types of supplies are excluded from this calculation.

– Uphold robust internal controls and accurate accounting records

– Demonstrate a strong compliance history with IRAS and Singapore Customs

– Meet any additional requirements set by the Comptroller of GST

How to Utilize MES

MES can be applied in various business scenarios, including:

  1. Importing goods for your own business operations
  2. Acting as a Section 33(2) agent to import goods for your overseas principal for sale or re-export in Singapore
  3. Importing goods for your overseas principal that will later be re-exported, provided you meet the criteria outlined in the GST: Guide on Imports
  4. Re-importing goods sent abroad for value-added activities, if you meet the requirements under section 33B

For scenarios 2 and 3, it’s crucial to:

– Ensure your overseas principal is not GST-registered

– Maintain separate records for goods owned by your overseas principal

– Retain control over the goods at all times

– Standard-rate the supply when selling locally and zero-rate the supply when exporting, provided you maintain the required export documentation

At BluTrust Pte. Ltd., we are committed to providing expert guidance on MES, ensuring that your business maximizes its benefits while maintaining full compliance with Singaporean regulations. Contact us today to learn how we can assist you.

  1. Your business must be GST-registered
  2. Your business must be active and financially solvent
  3. You have imported or will import goods for your business
  4. Zero-rated supplies must constitute more than 50% of all supplies, or the value of zero-rated supplies must exceed S$10 million in the last 12 months. For the purpose of arriving at the value of total supplies, please exclude the following which have been reported as standard-rated supplies:
    1. The value of relevant supplies you received from your supplier that were subject to customer accounting
    2. Reverse charge value of imported services and low-value goods
    3. An electronic marketplace operator’s value of remote services (digital and non-digital) and imported low-value goods from overseas vendors listed on its platform
  5. Maintain proper internal controls and accounting records
  6. Maintain good compliance records with IRAS, such as:
    1. Timely filing of GST and income tax returns
    2. Timely payment of GST, income tax, property tax, and withholding tax
  7. You maintain an excellent compliance record with Singapore Customs
  8. Comply with any other conditions imposed by the Comptroller of GST from time to time

Capital Allowances

Deductions for the decline in value of depreciating assets are available under the Uniform capital allowance (UCA) system. In addition to the rules for depreciating assets, deductions are allowed for certain other capital expenditure.

Small business entities have the option of choosing simplified depreciation rules. Under these rules, small business entities can claim an immediate deduction if the cost is below the relevant threshold or else add the asset to the small business depreciation pool.

Land, trading stock and most intangible assets (excluding exceptions such as intellectual property and in-house software) are not depreciating assets.

The decline in value is generally calculated by spreading the cost of the asset over its effective life, using one of two methods:

Prime cost method – decline in value each year is calculated as a percentage of the initial cost of the asset
Diminishing value method – decline in value each year is calculated as a percentage of the opening depreciated value of the asset
MORE: Australian Taxation Office (ATO) Decline in value calculator.

For most depreciating assets, taxpayers can either self-assess the effective life, or use estimates published by the ATO. Taxpayers can recalculate, either up or down, the effective life of an asset if the circumstances of use change and the effective life initially chosen is no longer accurate. An improvement to an asset that increases its cost by 10% or more in a year may result in an obligation to recalculate the effective life of the asset.

Decline in value of cars is restricted to the car limit. From 1 July 2022, the luxury car tax threshold for luxury cars is $64,741 (it was $60,733 for the year commencing 1 July 2021). Luxury car leases are treated as a notional sale and purchase, with decline in value restricted to the car limit.

The decline in value of certain depreciating assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. The decline in value for depreciating assets in the pool is calculated at an annual diminishing value rate of 37.5%.

Changes for 2022 and 2023

From 12 March 2020 until 31 December 2020, the asset cost threshold for the instant asset write-off (which is usually only available to small business entities) has increased from $30,000 to $150,000 and the eligibility criteria expended to cover entities with an aggregated turnover threshold of less than $500 million (up from $50 million).

Further, from 12 March 2020 until 30 June 2021 the Backing business investment measure applied to businesses with aggregated turnover below $500 million and provides either:

A deduction of 50% of the cost or opening adjustable value of an eligible asset on installation (existing depreciation rules apply to the balance of the asset's cost), or
For businesses using a small business depreciation pool, a deduction of 57.5% of the cost of the asset in the first year, with the balance added the asset to the small business pool
In addition, from 6 October 2020 to 30 June 2023, full expensing applies to allow eligible businesses with an aggregated turnover of less than $5 billion to deduct the full cost of new eligible depreciating assets. For businesses with aggregated turnover of less than $50 million, full expensing also applies to eligible second-hand assets.

Activity Statement

Businesses use activity statements to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Non-business taxpayers who need to pay quarterly PAYG instalments also use activity statements.

Activity statements are personalised to each taxpayer to support reporting against identified obligations.

Activity statements for businesses may be due either quarterly or monthly. Generally, businesses can lodge and pay quarterly if annual turnover is less than $20 million, and total annual PAYG withholding is $25,000 or less. Businesses that exceed one or both of those thresholds will have at least some monthly obligations. Non-business taxpayers are generally required to lodge and pay quarterly.

Taxpayers with small obligations may be able to lodge and pay annually. Some taxpayers may receive an instalment notice for GST and/or PAYG instalments, instead of an activity statement.

The Australian Taxation Office (ATO) web site provides instructions on lodging and paying activity statements. Detailed instructions are provided for each of the different tax obligations:

GST (Goods and Services Tax)
PAYG (Pay As You Go) Instalments
PAYG (Pay As You Go) Withholding
FBT (Fringe Benefit Tax)
LCT (Luxury Car Tax)
WET (Wine Equalisation Tax)
Fuel Tax Credits