Businesses may provide gifts and samples to their clients or prospective customers in the course of their business activities. Goods that you give away for free are treated as a supply that you make to the recipient.
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Claiming input tax for purchase of gifts
You may incur GST when you purchase the gifts from GST-registered suppliers or import the gifts into Singapore. You can claim the GST incurred on the gifts as input tax, provided that all the conditions for claiming input tax are met.
Accounting for output tax on gifts
When you give away gifts for free (for example, to your customer or your staff), you will need to account for output tax based on the Open Market Value (OMV) of the gifts if:
- The cost of the gift is more than $200 (excluding GST); and
- You had claimed input tax on the purchase or import of the gifts. If you had imported the gifts with GST suspended under a GST scheme such as the Major Exporter Scheme (MES), input tax is regarded as claimed.
Accounting of output tax is not required if:
1. The value of your gift (excluding GST) is $200 or less, or
2. You chose not to claim input tax when you purchased or imported the gift.
1. The value of your gift (excluding GST) is $200 or less, or
2. You chose not to claim input tax when you purchased or imported the gift.
Example 1
You gave away two New Year hampers (total cost $300 + GST $27) to Company A. One hamper was delivered on 5 Jan 2024 and the other was delivered on 15 Jan 2024 to Company A.
If you had claimed the GST of $27 incurred on the hampers as input tax, you will need to account for the output tax of $27 (i.e. 9% of $300), since the cost of the gift is more than $200.
However, if you chose not to claim the GST incurred on the hampers, you need not account for output tax on the gift.Example 2
You gave away two New Year hampers to employees in different departments of Customer B. The first hamper (cost $150 + GST $13.50) was delivered on 5 Jan 2024 to the employees in the Marketing and Sales Department of Customer B and the second hamper (cost $150 + GST $13.50) was delivered to employees in the Shipping Department of Customer B on 15 Jan 2024.
The hampers given to the two departments are regarded as a gift of goods to Customer B.
If you had claimed the GST of $27 incurred on the hampers as input tax, you will need to account for output tax of $27 (i.e. 9% of $300) since the cost of the gift is more than $200. However, if you chose not to claim the GST incurred on the hampers, you need not account for output tax on the gift.Example 3
You gave away New Year hampers. The first hamper (cost $150 + GST $13.50) was delivered on 5 Jan 2024 to Customer C and a second hamper (cost $150 + GST $13.50) was delivered to Customer D on 15 Jan 2024.
Even if you had claimed input tax of $27 on the hampers, you are not required to account for output tax since the cost of each hamper given to the two different customers is not more than $200.
To account for output tax, you can either:
- Pay for the output GST yourself. The recipient of the gift cannot claim the GST as its input tax.
- Have the recipient of the gift pay the output GST. The recipient will be able to claim the GST paid as its input tax if it can satisfy the conditions for input tax claim.
To account for output tax, you can either:
- Pay for the output GST yourself. The recipient of the gift cannot claim the GST as its input tax.
- Have the recipient of the gift pay the output GST. The recipient will be able to claim the GST paid as its input tax if it can satisfy the conditions for input tax claim.
Tax certificate
Unlike normal transactions, you should not issue a tax invoice to the recipient of the gift. Instead, you may issue a tax certificate to the recipient if:
- The recipient is GST-registered; and
- The recipient pays for the output tax.
The tax certificate, similar to a tax invoice, can be used by the recipient to support his input tax claims.
The tax certificate should state the following:
- The words "Tax Certificate";
- A description of the goods and the deemed GST amount based on the open market value of the goods; and
- The statement "Deemed GST on this supply is paid by the recipient."
Samples
GST is not chargeable on commercial samples if:
- The samples are given to an actual or potential customer; and
- The samples are in a form not normally available for public sale (They should be easily distinguished from actual products available for sale and marked with words such as "Not for sale" or "Sample only").
If these conditions are not met, you are treated as making a supply to the recipient. You may therefore need to account for output tax on these goods given away for free. Please refer to the GST treatment for gifts.
Catalogues that are given free to customers to promote sales can be treated as commercial samples. You do not need to charge and account for GST when you give these away.
FAQs
If I (the giver) purchased goods to be given away as gifts, can I claim the GST incurred on the purchase?
If I am entitled to claim the input tax incurred on the purchase of goods but chose not to, do I need to account for output tax when the goods are given away for free?
If the recipient of the gifts is not paying for the deemed GST output tax, do I (the giver) need to issue him with a tax certificate?
If I give a $300 gift voucher to my customer, do I need to account for output tax?
If my customer buys a good of a certain value, he will get another one for free. Is the free good considered a gift or part of the sales? Do I have to account for GST on the free good given?
The free good is treated as being sold as a package. You will need to account for GST on the price paid by the consumers.
For example, if you sell a good for $100 and give away a second one for free, you will be treated as having sold 2 items at the price of $100. In this case, you should account for GST on the total consideration of $100 for the 2 items.