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GST Incurred on Termination Expenses: Is It Claimable?

August 4, 2021

Termination Expenses and GST Incurred

 

GST incurred on termination expenses (e.g. liquidation fees) are considered to be made in the course or furtherance of the business and can be claimed as input tax credit.

The IRAS has recently amended its GST Guide on attribution of input tax on 9 July 2021. In the latest edition of the said e-tax guide, the IRAS has explained that for a partial exempt person (i.e. someone who makes both taxable and exempt supplies), GST incurred on termination expenses would not be claimable if:
  • The partial exempt business uses the standard input tax recovery formula; and
  • The partial exempt business does not make any supplies in the accounting period during which the termination expenses are incurred. 
For a fully taxable businesses, GST incurred on the termination expense continue to be fully claimable even though no supplies are made in the accounting period during which the termination expense is incurred.
If any of your group entities are going through the unfortunate event of business termination and if the GST incurred on termination expense is significant, please speak to us to see how we can assist to recover the input.
 
Termination Expenses
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