24 March 2015
On 18 March 2015, the Inland Revenue Authority of Singapore (IRAS) issued the second edition of the e-Tax Guide, “GST: GST Guide for the Fund Management Industry (2nd Edition)”.
This Guide explains the GST treatment of the services provided or received by fund managers in the fund management industry.
Fund management services provided by a fund manager (FM) to his client generally include research, investment advice and the preparation of reports. In return for the services performed, the FM is paid a ‘fund management fee’. The FM’s duties are set out in the investment agreements, mandates or trust deeds.
The provision of certain financial services is exempt from GST if the service falls within the description of paragraph 1 of Part I of the Fourth Schedule to the GST Act. The exemption however is not applicable to any arranging, broking, underwriting or advising services in relation to the financial transaction, other than re-insurance services.
Fund management services provided by a GST-registered FM generally do not fall within the description of paragraph 1 of Part I of the Fourth Schedule. Hence, it is subject to GST. Separately, if the FM acts as a principal in the exempt financial transactions (e.g. the FM buys and sells units in his own name), he may be considered as making exempt supplies in respect of such financial transactions. The Comptroller will generally consider a person as a principal if he trades in his own name, assumes ownership of goods or services supplied or bears the risks and rewards arising from a sale or purchase of an investment.
The Guide clarifies the GST treatment of the following scenarios:
- Fund management services provided to clients other than unit trusts
- Fund management services provided to unit trusts
- Distribution services in respect of unit trusts
- Brokerage services received by FM, and
- Soft dollar commission.
The second edition was updated with the following:
- Provision of new information on fund management services provided to clients other than a unit trust (paragraph 3)
- Insertion of Annex A (GST treatment for services (other than a trust fund) supplied to a fund on or after 1 April 2015) to provide a summary of GST treatment for services supplied to a fund.
The previous edition was published on 1 April 2014.
For full details, please refer the e-Tax Guide on the IRAS website.
Source: This article was extracted from the Inland Revenue Authority of Singapore’s (IRAS) website. Visit http://www.iras.gov.sg/ for more information.