Is recovery of expenses subject to GST?
In an attempt to update and clarify on this mind-boggling GST issue, the IRAS has released a 40 page e-Tax Guide aptly titled "Guide on Reimbursements and Disbursements of Expenses".
40 pages, I hear you say?
Ok, here's a quick summary: A reimbursement of expenses is subject to GST while a disbursement is not. The e-Tax guide lays down the differences between these two and provides numerous practical examples on reimbursements versus disbursements.
Some of the common issues finally explained include whether:
- Compensations are subject to 7% GST.
- You are allowed to claimed "blocked" expenses (e.g. private medical expenses) if they are subsequently on-charged to a related company.
The e-Tax guide may, however, prove daunting to some especially if you do not deal with GST on a daily basis. This is especially so when it comes to the section where the IRAS further dichotimizes a reimbursement into whether it is ancillary to a primary supply or not. Now, that is the part where you may want to hit the "snooze" button as it becomes difficult to comprehend. Notwithstanding the above, this e-Tax guide represents a valiant effort by the IRAS to educate GST-registered businesses on a common issue faced by many businesses.
If you have any questions, please feel free to reach us at 6652 5509 or drop us an email with your questions to Ask@GSTaxConsultancy.com