Singapore’s IRAS has updated its GST guidance on foreign currency transactions, covering approved exchange rate sources, invoicing and reporting requirements, and the treatment of realised and unrealised exchange gains and losses.
The Inland Revenue Authority of Singapore (IRAS) has updated its guidance on foreign currency transactions, adding sections on approved exchange rate sources, the treatment of different transaction types, and the reporting of exchange gains and losses.
Invoicing requirements
As reported in the guidance, for foreign currency sales, businesses must use approved GST exchange rates to convert the amount excluding GST, GST payable, and total amount including GST into Singapore dollars. The Singapore dollar amounts may be shown alongside the foreign currency figures, and the selected exchange rate source must be updated at least every three months and used consistently for at least one year.
Reporting requirements
Businesses must report the Singapore dollar amounts stated on the tax invoice in their GST returns under Box 1: Total value of standard-rated supplies and Box 6: Output tax due.
Purchases and imports denominated in foreign currency
For foreign currency purchases, the supplier must state the GST payable on the tax invoice in Singapore dollars using the exchange rate from an approved source. Businesses must use this Singapore dollar amount when claiming input tax in their GST returns and should not use the amount recorded in their accounts if a different exchange rate was applied. For imports, input tax must be claimed based on the Singapore dollar amounts stated in the import permits issued by Singapore Customs.
Preparations for foreign currency transactions
Businesses should select an approved exchange rate source, establish systems to track exchange gains and losses, and ensure that their accounting systems can consistently convert foreign currency amounts.
Approved exchange rate sources
Approved exchange rate sources include Singapore banks, local newspapers, and the Monetary Authority of Singapore (MAS). Global sources include reputable news agencies, eligible foreign central banks, and online platforms such as Yahoo! Finance and XE, provided their rates come from approved underlying sources.
Treatment of different transaction types
For sales, businesses must convert the total amount payable excluding GST, the GST amount, and the total amount payable including GST. These amounts are reported in Box 1: Standard-rated supplies and Box 6: Output tax.
For purchases, businesses should use the supplier’s Singapore dollar amounts stated on the tax invoice. For imports, they should use the Singapore dollar amounts stated on the relevant import permits. These amounts are reported in Box 5: Taxable purchases and Box 7: Input tax.
Exchange gains and losses
Exchange gains and losses from foreign currency transactions may constitute a GST supply. Realised gains and losses from completed transactions must be reported, while unrealised gains and losses are generally excluded unless an alternative reporting method is used. Year-end translation differences are not reported as they do not constitute a supply.
Businesses must calculate their net realised exchange gain or loss for each prescribed accounting period and report the absolute value in Box 3: Value of exempt supplies. For example, losses of SGD 150 and SGD 200, offset by a SGD 100 gain, produce a net loss of SGD 250, which is reported as SGD 250 in Box 3.
Alternative reporting method
Businesses that find it administratively difficult to distinguish between realised and unrealised exchange gains and losses may report the total value of both, provided that their accounting practices comply with proper accounting and reporting standards and they consistently use the same basis for reporting the value of exempt supplies arising from foreign currency and derivative transactions.
However, including unrealised gains and losses may affect input tax claims under the De Minimis Rule, so businesses should weigh the reduced tracking burden against the potential impact on their claims.
