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Is GST Applicable for Office Spaces?

Posted by on April 9, 2022

As we know, Goods & Services Tax (GST) is usually not applicable for residential properties in Singapore except for movable furniture and fittings in some cases whereby the residential property landlord is GST registered and is renting the furnished residential property to a tenant.

So why is GST applicable for commercial office spaces in Singapore?

Most of The Office Space Landlords are GST registered

The reason why GST is applicable for commercial office spaces most of the time is because the landlords or owners of office spaces are usually GST registered and hence it is mandatory for these GST registered landlords to charge GST when selling or renting the commercial property.

The GST amount collected by a GST registered company is to be collected on behalf of the Inland Revenue Authority of Singapore (IRAS) which is the tax authority of Singapore and the GST collected is not to be kept as earnings for the owner or landlord.

Makes Sense for Office Space Purchaser to Be GST Registered

As most owners of office spaces are GST registered companies, it may make sense for a purchaser of an office space to be GST registered as the GST payable can be claimed back from IRAS subsequently.

On the other hand, if the purchaser of an office space decides not to be GST registered for whatever reasons and if the seller of the office space is GST registered, the amount paid by the non GST registered purchaser for the GST component will not be claimable and will be fully borne by the purchaser.

While GST rate is currently at 7%, it will be subsequently revised to 8% & 9% progressively in time to come as already announced. Hence it may make sense for purchasers to be GST registered since the GST payable may be claimed back.

Different from Residential Properties

Commercial properties are unlike residential properties as pure residential properties are not subject to GST in a sale transaction whereas commercial property sale transactions may be subject to GST if the seller is GST registered.

This is why it may be a wise choice for an office space purchaser to be GST registered in order to claim back the GST amount.

Pros & Cons of Being GST Registered

While being GST registered does have its pros, it is not without any cons. By deciding to be a GST registered office space owner, it can also mean that should the office space owner decide to rent out the property, GST will also have to be charged to the tenant who is renting the office space. GST registered tenants would usually not mind paying GST on the rent, however this may be subjective if the tenant is not GST registered and has to bear the cost of GST on the rent.

You may note that voluntary GST registration is also possible if all the relevant criteria are met. Voluntary GST registration is unlike compulsory GST registration whereby it is compulsory for a company to be GST registered if its taxable turnover is more than 1 million. More details can also be found on IRAS’ website.

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