6 September 2016
On 1 September 2016, the Inland Revenue Authority of Singapore (IRAS) issued the third edition of the e-Tax Guide, “GST: GST Guide for the Fund Management Industry (3rd 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.
In the third edition, paragraphs 6.2 and 6.3 were amended to clarify that a stockbroker can only zero-rate his services if both the fund manager and its customer belong overseas.
The previous edition was published on 18 March 2015.
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.