Facebook advertising has become an increasingly popular marketing channel for businesses in Singapore. With the ability to target specific audiences and track campaign performance, Facebook ads can be a cost-effective way to reach new customers. However, there has been some confusion around whether GST needs to be charged on Facebook ads in Singapore. In this article, we’ll examine if GST applies to Facebook ads and look at some of the key considerations for businesses advertising on the platform.
What is GST?
GST (Goods and Services Tax) is a consumption tax levied on most goods and services in Singapore. The current GST rate is 7%. Under the GST law, GST is charged on any supply of goods or services made in Singapore by a GST-registered business. The person receiving the goods or services (usually the customer) pays the GST, which the business collects on behalf of the tax authorities. There are some exceptions where GST is not charged – these include the sale and lease of residential properties and financial services.
Is Facebook advertising a supply of services?
To determine if Facebook ads are subject to GST, we first need to establish whether advertising on Facebook constitutes a ‘supply’ of services. The term ‘supply’ refers to anything that is provided in return for payment. When a business pays to advertise on Facebook, it receives advertising services from Facebook in return. This includes the ability to target ads, run campaigns and access reporting. As such, Facebook advertising amounts to a supply of services from Facebook to the business. These services are digital rather than physical in nature, but a supply exists nonetheless.
Is the supply made in Singapore?
Now that we’ve established that Facebook advertising involves a supply of services, the next question is whether this supply is made in Singapore. Generally, under Singapore GST rules a supply of services is treated as made in Singapore if:
- The supplier belongs in Singapore; or
- The services are supplied through an entity belonging in Singapore; or
- The recipient of the services belongs in Singapore and is not a GST-registered person.
In the case of Facebook ads:
- Facebook is a foreign company that does not belong in Singapore.
- While Facebook has an office in Singapore, its advertising services are supplied from its overseas headquarters.
- The recipients (customers who purchase Facebook ads) are located in Singapore.
As such, the supply of Facebook advertising services would typically be treated as made in Singapore, since the recipients belong here. This makes such services liable to GST.
Is Facebook GST-registered in Singapore?
The next question is whether Facebook is GST-registered in Singapore. If a foreign company makes taxable supplies in Singapore that exceed the $1 million GST registration threshold, it is required to register for GST. Based on the scale of its advertising business, Facebook exceeds this threshold and is GST-registered in Singapore. Its GST registration number is 199702668R.
Do any GST exemptions or exceptions apply?
As Facebook’s advertising services constitute a taxable supply made in Singapore by a GST-registered entity, GST would generally need to be charged. However, we also need to consider whether any exemptions or exceptions apply that would relieve Facebook ads from GST.
The main exemptions that could potentially apply are:
- Export of services – services supplied to recipients belonging outside Singapore may be zero-rated.
- Sale of intangible goods – intangible supplies like issuing licenses or digital products can be exempt from GST if the entity belongs outside Singapore.
However, based on how Facebook advertising is structured, it does not appear that either of these exemptions would apply:
- Facebook ad services are supplied to recipients in Singapore.
- The supply encompasses advertising services rather than intangible goods.
As such, there is no exemption that would exclude Facebook ads from GST.
What GST rate applies to Facebook ads?
Standard-rated supplies in Singapore are subject to GST at the prevailing rate of 7%. There is no separate or reduced rate for online advertising services. As such, the GST rate for Facebook ads is 7%.
For example, if a business pays $1,000 for Facebook ads, it will be charged GST of $70 (i.e. 7% x $1,000).
Who is responsible for paying and accounting for the GST?
As a GST-registered business making taxable supplies in Singapore, Facebook is responsible for:
- Charging GST on advertising fees to its customers
- Issuing GST invoices
- Declaring output tax on Facebook ad sales to IRAS
- Paying the GST collected to IRAS
Facebook includes GST charges in the invoices issued to advertisers. It will collect and account for the GST to IRAS based on these tax invoices.
As the customer, the business purchasing the Facebook ads does not need to charge GST when on-charging the cost to its own customers. However, it can claim the GST paid to Facebook as input tax, provided it meets normal input tax claim conditions.
Are there any special rules for overseas Facebook advertisers?
For overseas businesses that purchase Facebook ads to target Singapore users, normal cross-border rules apply:
- Facebook will still charge GST on the ad spend.
- As the services are supplied in Singapore, overseas businesses are not entitled to claim the GST back through tourist refund schemes.
- If the overseas business makes taxable supplies in Singapore, it may be able to claim the GST paid to Facebook as input tax. The normal GST registration requirements apply.
Summary
In summary:
- Facebook advertising constitutes a supply of services made in Singapore by a GST-registered overseas supplier.
- No exemptions apply, so Facebook ads are standard-rated for GST.
- GST is charged at 7% on the value of Facebook advertising spend.
- Facebook is responsible for collecting and accounting for the GST to IRAS.
- Normal GST rules apply to overseas advertisers targeting Singapore users.
So in conclusion, the answer is yes – Facebook ads are subject to goods and services tax (GST) in Singapore. Businesses should factor this 7% cost into their Facebook advertising budgets.
Frequently Asked Questions
1. Is GST charged on all types of Facebook ads?
Yes, all Facebook ad formats are subject to GST, including:
- Photo ads
- Carousel ads
- Video ads
- Stories ads
- Messenger ads
The GST treatment applies to ads whether they are targeted locally or internationally. The only exception would be if the recipient is belonging outside Singapore and services can be treated as exported.
2. Is GST charged on Facebook ads targeted outside Singapore?
For Facebook ads targeted specifically at users outside Singapore, it may be possible to zero-rate the supply as an export of services. To qualify, the recipient must not belong in Singapore and you need supporting documents like the targeting details. You should consult with IRAS or an accounting professional to determine if zero-rating applies for your cross-border Facebook ads.
3. Is Facebook advertising GST-exempt for charities and non-profits?
Unfortunately charities and non-profit organisations must still pay GST on Facebook advertising. While they can claim partial GST relief on expenses through the Not-For-Profit Organisation Scheme, standard-rated supplies made to them are not GST exempt.
4. Can I claim GST paid on Facebook ads as input tax?
As a GST-registered business in Singapore, you can claim the GST paid on Facebook advertising as input tax credit. To do so, you must obtain a valid GST tax invoice from Facebook and meet normal input tax claims conditions relating to the use of advertisements. You should maintain the invoices as part of your GST record keeping.
5. Do I need to charge GST when on-charging Facebook ads?
If you are purchasing Facebook ads for your client and wish to on-charge the fees, you do not need to charge GST. This is because GST has already been charged on the supply by Facebook. You should retain the Facebook tax invoice issued to support not charging GST on the onward supply.
Impact on businesses
The need to pay GST on Facebook advertising will increase costs for businesses marketing digitally in Singapore. Based on typical ad spend levels, businesses could see their Facebook advertising costs increase by around $500 to $5,000 per year in GST. Some key impacts include:
- Reduced advertising budgets – the additional 7% GST cost will mean businesses can purchase fewer Facebook ads for the same total spend.
- Increased record keeping – businesses will need to retain Facebook tax invoices to support GST claims.
- More complex accounting – tracking GST on digital supplies requires some accounting adjustments.
- Higher costs for new businesses – those not GST-registered cannot claim GST paid as input tax credits.
That said, businesses can factor the GST costs into their Facebook advertising budgets. With targeted digital marketing so important today, most businesses will accept the 7% GST rate as a cost of accessing Facebook users. And for GST-registered firms, the ability to claim input tax credits offsets a major part of the GST paid.
Accounting for GST on Facebook ads
Proper accounting treatment is important when handling GST on Facebook ad supplies. Here are some key tips:
- Obtain tax invoices from Facebook to support GST claims.
- Check invoices match to bank/PayPal payment records.
- Keep digital copies of Facebook invoices for GST audit.
- Ensure no double claiming of input tax credits.
- Track total GST payable on Facebook advertising.
- Claim GST through GST returns or annual Adjustment/Claim.
Some common errors to avoid:
- Claiming input tax with no invoice.
- Failing to account for GST on imported services.
- Not declaring Facebook advertising GST to IRAS.
- Incorrectly charging GST on media agency fees.
Using accounting software or a bookkeeper can help minimize GST errors on digital marketing expenses like Facebook ads.
Verifying if GST was charged
To confirm whether you were correctly charged GST on Facebook ads, you can check for these indicators on invoices and in advertising reports:
- A Singapore GST amount will show on invoices.
- The wording “Goods and services tax chargeable” appears.
- GST is included in the total billing amount.
- Facebook’s GST registration number 199702668R is shown.
- The 7% GST rate is applied to ad spend.
- Campaign reports show a GST component.
It can be trickier to identify GST charges if you use a third party to purchase Facebook ads. Work with your agency or advertiser partner to obtain copies of original invoices from Facebook.
Can IRAS make exceptions on Facebook GST?
IRAS has limited discretion when applying GST law in Singapore. For Facebook ads:
- The “belonging” and place of supply rules for services are quite fixed, meaning Facebook’s supplies made here are taxable.
- There are no applicable exemptions that can be invoked.
- IRAS cannot waive GST on standard-rated supplies like advertising.
The best IRAS could potentially offer is more flexible arrangements for businesses to account for and pay the GST due. But they cannot exempt Facebook ads from GST entirely when the law requires it to be taxed.
Conclusion
In summary, Facebook advertising purchases in Singapore are subject to 7% GST as the advertising services are treated as supplied in Singapore. While this increases costs for advertisers, registered businesses can offset the GST through input tax credits. Proper accounting for GST on digital marketing activities like Facebook ads is advised to ensure tax compliance and optimize claims.