5 September 2011

In this year’s Budget Statement, the Minister for Finance had announced measures to ease GST compliance for the biomedical industry with respect to clinical research activities. IRAS has since issued guidance on these measures, as well as to clarify the GST treatment for other common scenarios and issues in the biomedical industry based on existing GST rules.

The various e-Tax Guides issued by IRAS explains the following:

(a) GST relief on importation of clinical trial materials (CTMs) into Singapore

All goods imported into Singapore are usually subject to 7% GST. GST-registered persons are entitled to claim the import GST incurred on the goods if they satisfy the conditions for claiming input tax under sections 19 and 20 of the GST Act.

From 1 October 2011 onwards, to support the growth of local clinical trials as well as ease the GST compliance burden for businesses engaged in clinical trials, a new GST relief will be granted for all CTMs imported into Singapore so long as they are for local clinical trials, re-export or disposal/ destruction. Under the relief, no import GST is payable upfront on such importation of CTMs. The above GST relief is granted on the basis that CTMs cannot be legally traded or sold and hence, are not for private consumption.

Prior to 1 October 2011, GST on CTMs imported for local clinical trials cannot be claimed. For CTMs imported for re-export or disposal, while businesses may either claim the GST paid as input tax or be relieved of import GST, the purpose of the import has to be identified upfront.

Qualifying  conditions for  the  relief and  the  import procedures can be found on the  Singapore Customs’  circular  “Goods and Services Tax Relief for Import of Clinical Trial Materials” (Circular 20/2011).

(b) Extending the enhanced Approved Contract Manufacturer and Trader (ACMT) Scheme to qualifying biomedical contract manufacturers

Contract manufacturers may:

• invoice their overseas client for their supply of value added services, where the goods that have been treated or processed are to be exported, delivered or destroyed locally based on the overseas client’s instructions; and/or
• receive goods (for example, raw materials) consigned to them by their overseas client for use in the treatment or process. These goods may be imported into Singapore or purchased locally by their overseas client.

From 1 October 2011, contract manufacturers of Active Pharmaceutical Ingredients (APIs) in the biomedical industry may apply for the ACMT scheme to enjoy a host of benefits which includes relief on accounting for GST on the value added services supplied to their overseas client, where the goods treated or processed are delivered or destroyed locally. They will also be able to recover GST incurred on goods consigned to them by their overseas client for use in the treatment or process.

Contract manufacturers in other business segments in the biomedical industry will also be considered for the ACMT scheme on a case-by-case basis.

Before 1 October 2011, GST must be charged on the supply of value added service to overseas clients, where the goods treated or processed are delivered or destroyed locally. Contract manufacturers are also not entitled to claim as their input tax, GST incurred by their overseas client on the goods consigned to them, regardless of whether the goods are imported or purchased locally. Their overseas client is usually unable to register for GST to claim the GST incurred since it is unlikely to engage in GST taxable activities in Singapore.

The eligibility  conditions,  application  process  and  as  well  as the  accounting, reporting and documentary requirements of the ACMT Scheme can be found in the revised edition of the e-Tax Guide, “Approved Contract Manufacturer and Trader (ACMT) Scheme”.

The changes will take effect by way of Ministerial Remission, from 1 October 2011, until the relevant GST legislation is amended.

c) GST treatment for specific supplies in the biomedical industry

IRAS has also clarified the GST treatments based on existing GST rules for these common scenarios and issues in the biomedical industry:

• Taxability of grants
• R&D services supplied to overseas customers
• Research service agreements
• Research and clinical trials involving animals or human subjects
• Research and testing of animal or human specimens or samples
• Research involving prototypes.

The relevant e-Tax Guides on the biomedical industry can be found here:

–     GST Guide for the Biomedical Industry

–     Approved Contract Manufacturer and Trader (ACMT) Scheme (Revised).

Source: Inland Revenue Authority of Singapore (IRAS) and Singapore Customs.