Purpose and the recovery decision sequence
The ninth edition published 30 January 2026 covers businesses making both taxable and exempt supplies. Normally claim input directly attributable to taxable supplies, block exempt direct input and apportion shared residual input. Full recovery may be available through de minimis or, for non-regulation 34 businesses, where all exemptions fall within regulation 33. Otherwise regulation 35 affects recovery of regulation 33 costs. Claims each accounting period are provisional and require a longer-period review. The recommended calculator is retained in records, not routinely submitted.
De minimis: both thresholds and blocked-cost exception
All exempt supplies must average no more than S$40,000 monthly AND be no more than 5% of taxable-plus-exempt supplies. Even then regulations 26/27 blocked input remains disallowed. Exclude customer-accounting receipts, RC imported services/LVG and underlying sellers’ remote-services/LVG reported by OVR marketplaces from the taxable/total base. April–June 2020 example: standard S$2,080,000, zero S$300,000, exempt S$105,000, total S$2,485,000; monthly exempt S$35,000 and ratio 4.2%, so de minimis passes. Retest at longer-period end.
Regulation 33: necessary financial supplies
Regulation 33 treats certain financial exemptions as necessary/integral to taxable business, subject to 34/35. The complete fourteen categories and examples are listed below. They cover deposits/exchange, first issues, employee credit, receivables, trust units, defined hedges, bond/trade interest and Islamic financing. Ordinary investments or all hedging do not automatically qualify: the particular statutory source/purpose must match. If these are the only exempt supplies and the business is not 34, full input can be recovered despite failing de minimis.
| Provision | Exempt category | Source example |
|---|---|---|
| (a) | Money deposit | Current/fixed bank deposits |
| (b) | Currency exchange, excluding collector/investment/numismatic notes or coins | Foreign sale receipts converted into SGD |
| (c) | Debt security first issue/allotment/ownership transfer by first issuer | First bond issue |
| (d) | Equity first issue/allotment/ownership transfer by first issuer | IPO shares |
| (e) | Taxable-business credit to employees | Car/housing/study loans |
| (f) | Trade-receivable assignment | Factoring |
| (g) | Unit issue by unit/business trust | REIT units |
| (h) | Interest-risk hedge for33(a)/(c) or borrowing for taxable/would-be-taxable overseas supplies | Bond or plant loan interest swaps |
| (ha) | Currency-risk hedge for33(a)/(c)/(d)/(g), taxable/would-be-taxable supplies or relevant borrowing | FX forwards on credit sales |
| (hb) | Utility/freight/commodity price hedge for taxable/would-be-taxable supplies | Oil futures, metal forwards, freight forwards, electricity CFDs |
| (i) | Bondholder credit interest, including discounted maturity gain | Bond coupon/zero-coupon discount |
| (j) | Credit on trade receivables | Customer credit-term interest |
| (k) | Islamic debt issue/transfer | Ijara Wa Iqtina sukuk |
| (l) | Islamic debt financing effective return | Sukukholder financing |
Regulation 34: eleven financial-business categories
Businesses carrying on these or similar businesses cannot use the regulation 33 relief: licensed full/wholesale/offshore banks; approved merchant banks/financial institutions; life insurers, general/life reinsurers and reinsurance brokers; finance companies; moneylenders/currency traders; licensed cross-border-money-transfer or money-changing providers; pawnbrokers; debt factors; credit/charge/payment-card companies; unit trusts excluding REITs/SPVs and business trusts/SPVs; and digital-payment-token traders. Do not confuse exclusion from 33 relief with an inability to deduct costs directly attributable to taxable supplies.
Regulation 35 and the two residual formulas
For a non 34 business with non 33 exemptions, regulation 35 passes only where non 33 exemptions are no more than 5% of taxable-plus-all-exempt supplies; no S$40,000 condition applies to this distinct test. Passing permits direct 33 input and residual × (taxable+33 exemptions)/total. Failing permits taxable direct input only and residual × taxable/total. Direct non 33 costs remain blocked. Apply the same exclusions to numerator/denominator; qualifying incidental exemptions may leave the denominator, but never remove 33 exemptions already added to the numerator. Round the ratio to nearest whole percent. Retest 35 over the longer period.
Tax years and four longer-period scenarios
Quarterly Jan–Mar/Apr–Jun/Jul–Sep/Oct–Dec gives April–March tax year; Feb–Apr etc gives May–April; Mar–May etc June–May. Registration-period longer review begins the actual first exempt date and ends before first tax year. Example registration 15 April 2020, exemption 1 August 2020:1 August–31 March 2021. In a tax year with no preceding exemptions, start the first exempt quarter’s first day: exemption 15 July 2020 gives 1 July–31 March 2021. First exemption 15 January 2021 only in final quarter gives no longer period. Deregistration 30 September 2018 truncates April 2018–March 2019 year to 1 April–30 September 2018. Otherwise the whole tax year is reviewed.
Longer-period recalculation and adjustment
Recompute the longer period using the same tests and attribution. A provisional failure can become a longer-period pass and recover previously blocked exempt input; a provisional pass can become failure requiring repayment. Where both pass no adjustment; any failure requires relevant recomputation. Difference between recomputed recovery and total provisional claims goes to Box 7 of the first F 5 after the longer period, adding underclaims or deducting overclaims. This mechanism reconciles fluctuating ratios, not a second claim of the same input.
Incidental exempt supplies: full separate-business tests
For denominator relief under 29(3), predominantly taxable business is prima facie indicated by non 33 exemptions no more than 5% over the longer period. Exceptional inevitable restructuring/divestment share sales, broker error-trade shares or REIT-manager remuneration-unit sales may qualify above 5%. The exempt activity must not be separate business: it occurs infrequently or ceases when the main taxable business ceases, AND uses minimal resources. Infrequent generally means at most four same-nature occurrences in the longer period, counting both new/outstanding loans and such supplies qualifying for zero-rating. Minimal generally means passive/unmonitored or at most 1% staff/manhours. Qualifying 34 businesses predominantly zero-rated can also use this separate incidental analysis.
Self-assessment, direct costs and historical counting change
Self-assess specified conditions/examples; write to the Comptroller only outside them. Incidental treatment affects residual-input denominator only; direct costs of exempt supplies are not reclassified residual. The 18 June 2021 clarification counts zero-rated same-exempt-activity supplies; no retrospective adjustment where they were previously excluded, but next tax years start 1 April,1 May or 1 June 2021 according to filing cycle. Period-by-period incidental testing can be used with prorated frequency and later retesting; alternatively assess at longer-period end. No penalty applies to that longer-period adjustment under the FAQ, rather than a blanket exemption for undisclosed errors.
Reverse charge and seven FAQ outcomes
RC applies from 2020 to imported services where business/group lacks full input recovery, and from 2023 to LVG bought via local/overseas sellers, marketplaces or redeliverers; directly taxable-use LVG exclusion is unavailable for prescribed fixed/special-all-input formulas. Fluctuating exemptions permit election to apply RC at longer-period end. FAQs: currency hedge on dividends is not 33 because dividends are not taxable supply; forecast commodity hedges may qualify within reasonable sales/risk management; fund managers transfer rather than issue trust units; an approved special formula remains until revocation requested with reasons; a trust’s foreign-currency unit distribution hedge can stem from 33(g) issuance; borrowing hedges for zero-rated overseas lending can qualify; and incidental testing each period must be prorated/retested as above.
Appendix 2: complete historical apportionment example
April–June 2020 chemical sales S$1,000,000, RC S$3,000,33 FX S$10,000 and hedge S$5,000, non 33 shares S$50,000. F 5 supplies S$1,068,000 but tests use S$1,065,000 after RC exclusion. Exempt ratio 65,000/1,065,000=6.10% fails de minimis, non 33 ratio 50,000/1,065,000=4.69% passes 35. Historical 7% inputs: chemicals 800,000→56,000; hedge 100→7; fund fees 2,000→140 blocked; local overhead 7,000→490 and overseas IT 3,000→210 are residual 700. Ratio 1,015,000/1,065,000 rounds 95%, residual 665; total 56,000+7+665=S$56,672 of S$56,847 incurred. These 2020 amounts do not represent the current GST rate.
Appendix 3: annual overclaim of S$842.79
April 2020–March 2021 taxable 4,600,000 plus exempt 719,000 total 5,319,000. Annual exempt monthly 59,917 and 13.5% fail de minimis. Four quarters’ residual inputs total 44,736.74, provisional recovery 39,316.39. Annual taxable ratio 86.48% rounds 86%, giving 38,473.60; subtract overclaim 842.79 in Box 7 for the quarter ending 30 June 2021. The complete quarter-by-quarter table below preserves taxable/exempt values, tests and provisional input.
| Period | Taxable S$ | Exempt S$ | Total S$ | Monthly exempt | Exempt % | De minimis | Residual incurred | Provisional claim |
|---|---|---|---|---|---|---|---|---|
| Apr–Jun2020 | 1,000,000 | 100,000 | 1,100,000 | 33,333 | 9.1% | No | 12,374.05 | 11,260.39 |
| Jul–Sep2020 | 1,500,000 | 59,000 | 1,559,000 | 19,667 | 3.8% | Yes | 10,112.76 | 10,112.76 |
| Oct–Dec2020 | 900,000 | 40,000 | 940,000 | 13,333 | 4.3% | Yes | 7,894.31 | 7,894.31 |
| Jan–Mar2021 | 1,200,000 | 520,000 | 1,720,000 | 173,333 | 30.2% | No | 14,355.62 | 10,048.93 |
| Total | 4,600,000 | 719,000 | 5,319,000 | 59,917 | 13.5% | No | 44,736.74 | 39,316.39 |
Appendix 4: time-barred quarters do not always bar the later adjustment
Discovery 1 May 2021 of no apportionment in April 2015–March 2016: the four original quarters are more than five years old. Actual claims 44,736.74 should provisionally have been 39,316.39, with quarterly overclaims 1,113.66/0/0/4,306.69. The separate annual adjustment 842.79 belongs to 30 June 2016 period, still within time as at May 2021, so file F 7 and deduct there even though earlier quarters are barred. If discovery were 1 March 2021,31 March 2016 is still open and also needs F 7 correction of 4,306.69. Prompt voluntary disclosure can reduce penalties; expiry is not permission to intentionally postpone disclosure.
Appendices 5–6: cash pooling and two loan examples
JKL automated cash pooling earns 3% of total supplies and uses no staff, ceasing with taxable operations; it is incidental. ABC makes two loans, non 33 below 5%, one of 500 staff (0.2%) with no dedicated monitoring: incidental. DEF has two new plus ten outstanding loans, three of 500 staff (0.6%) and non 33 below 5%: not incidental because twelve loans exceed the infrequency guideline, despite minimal resources. Count outstanding as well as new lending, not merely the two new advances.
Appendix 7: three share-sale cases and their direct-cost restriction
Manufacturing GHI divests S$50 million shares at 6% of annual supplies, two/500 staff 0.4%: exceptional one-off taxable-business divestment can be incidental. PQR restructures two subsidiaries at 6%, two/250 staff 0.8%: one restructuring counts as one occurrence and qualifies. STU perfume retail sells one holding under two contracts to raise working capital, one/100 staff 1%, non 33 below 5%: two infrequent occurrences qualify. In all three, brokerage/other direct costs for local share sales remain blocked even though the sale may be removed from residual denominator. Enquiries go to IRAS GST Contact Us; cover 2026 amendment log ends 2022.
Official source
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