Understanding the Nuance of Tax Invoices in Singapore

What is an invoice?

An invoice is a legally binding document that you issue to your buyers to collect payment for any product or service that you have sold to them. It contains various details such as the product or service code, the cost of the item sold, invoice receipt number, business name and address, customer name, and billing address, among other things.

While every business doesn't need to issue an invoice, it is advisable to do so. Aspire's invoice management software can be used to issue different kinds of invoices to your customers. 

Types of invoices

There are two main kinds of invoices a business should know about – standard or retail invoices and tax invoices.

A standard invoice is an invoice that a business issues to its end customers. It doesn’t contain any details about tax. A tax invoice, on the other hand, is given to another vendor or entity with Goods and Services Tax details. In addition to the price of goods and services, it also includes the amount of tax that the customer must pay. 

Tax invoice meaning

Tax invoice means a legally binding document of sale issued to a registered purchaser at the time of sale. They are essential for tax purposes such as filing taxes and getting input credit.

Tax invoices are usually made in triplicate – one is issued to the buyer while you keep two copies. One of these copies will have to be submitted to the relevant government authority when filing taxes.

Difference between a tax invoice and a standard invoice

When trying to understand the difference between a tax invoice meaning and a standard invoice meaning, the first thing to look at is their definitions. A tax invoice is issued to a vendor with a Goods and Services Tax (GST) number. Tax authorities recognize it for filing taxes and claiming tax refunds. A standard invoice is issued to customers directly to record the sale of a product or a service.

Some of the other differences between the two types of invoices are:

GST number

A tax invoice and a standard invoice have mostly the same contents, such as the name of the buyer and seller, the billing address of the buyer and seller, the receipt number, etc. An additional detail that the tax invoice includes is the GST number. You may also issue a separate GST invoice along with the tax invoice.

Number of copies

A tax invoice is issued in triplicate. One copy is given to the buyer, and two copies are for you to hold. One of these copies has to be submitted to tax authorities at the time of filing taxes. A standard invoice is issued in duplicate – one to the buyer and one for you.

Purpose

The primary purpose of a tax invoice is to avail of tax credit or tax relief. On the other hand, a standard or retail invoice is issued to keep track of the goods and services sold. It can also help with accounting and internal recordkeeping.

GST registration

A tax invoice only needs to be issued if both the buyer and the seller have registered GST numbers. A standard invoice is given to a customer who may not have a GST number.

Understanding Credit and Debit Notes 

Credit Note 

A seller issues a credit note, a legal document that informs buyers about a price adjustment or a refund they owe the buyer. Usually, credit notes are issued when the buyer returns any items, or they have been overcharged for an order. It is similar to saying something like sorry you had to return this or sorry for overcharging you. Instead of returning the payment to the buyer, a simple credit note is given. You can also use it to fix errors in past invoices or offer the buyer discounts or concessions on a future purchase. It's an efficient way to ensure that business records are fair and organized by rectifying billing errors. 

Debit Note  

A debit note is issued by the seller to a buyer. It is typically a reminder that there has been a billing mistake or change in the bill amount. This legal document is a friendly way of saying, "Something is wrong with the invoice issued, and it needs to be rectified." Debit notes are issued because something was not delivered, returned, or damaged. 

It means the seller desires to make things right by adjusting the buyer's pay. It is issued to adjust an existing invoice, especially if goods were not delivered to the buyer as agreed, the buyer returns a shipment, or only a part of the delivery was completed. The debit note conveys meaning that the buyer was billed too much, and an adjustment must be made. Once again, just like a credit note, a debit note also ensures that business records are accurate, fair, and organized. 

Tax Invoice vs. Credit Note vs. Debit Note 

Now that you understand what a tax invoice is, let us see how it differs from credit and debit notes.

Understanding how a tax invoice is different from a receipt

Sellers and vendors issue invoices and receipts to customers. A receipt is a confirmation slip issued to a customer that the goods and services have been received and payment for the same has been made. It acts as proof of ownership. A tax invoice is an official document that requests payment and outlines the tax due on a sale. Receipts are much less detailed than a standard or tax invoice. Aspire's invoice management software can be used to issue regular as well as tax invoices for different business sales.

What does a tax invoice contain?

A tax invoice template should contain the following:

• Date of invoice issue
• The invoice number
• Name of the buyer
• Billing address of the buyer
• Name of the seller
• Billing address of the seller
• The relevant tax identification number
• The description of the items
• Quantity
• Price per item
• GST charged on each item
• The amount of tax charged
• Total cost, including the tax or GST
• Signature of the relevant signatory

Common Mistakes to Avoid in Tax Invoices 

Here are some of the most common mistakes businesses make while filing tax invoices. 

Not Providing the Required Information

The IRS has given a detailed list of information that must be mentioned in every tax invoice, not including the required information that results in non-compliance. Whether it is the supplier's name, invoice number, date of issue, description of goods or services provided, quantity or value of goods and services, or anything else along these lines, vital information must be mentioned. You were introduced to what is a tax invoice and a detailed list of information that must be included in it. Ensure the information provided on a tax invoice is up-to-date and correct. 

Incorrect Use of Tax Rates 

Certain services in Singapore are zero-rated, some are exempt from GST, and some have a standard rate. Whenever your business issues a tax invoice, ensure the correct tax rate is mentioned. When an incorrect tax rate is mentioned, it results in non-compliance and can also attract penalties. 

Not Separating the GST 

Whenever GST is chargeable on a tax invoice, it must be mentioned separately on the invoice itself and should not be added to the total amount of the invoice. This results in unnecessary confusion not only for not only the taxation authorities while auditing but also for the customer. 

Not Issuing the Invoice on Time 

Ensure the business issues tax invoice within 30 days of fulfilling a delivery or supply. Not doing this not only results and non-compliance but can cause delays while filing for GST claims. A good business practice is to promptly issue a tax invoice after the services or goods are provided. 

Incorrect GST Information 

Whenever attacks invoice is issued by a GST-registered business, the correct GST number must be mentioned. Incorrect or missing GST number results in rejection of the claim while inputting tax credit. 

Not Registered for GST 

Another common mistake businesses make is issuing tax invoices when they are not registered for GST. If the business is not registered, it is not allowed to charge GST or issue a tax invoice, which violates Singapore's taxation law. 

Not Keeping a Proper Record 

Businesses are required to maintain a detailed, accurate, and up-to-date record of all the tax invoices they have issued for at least five preceding years. Not doing this can attract severe penalties during an audit. It is also important to keep a record of not just the tax invoices but the receipts, too. The difference between a tax invoice vs. receipt is the former is used to collect a payment while the latter is an acknowledgment of the payment received.  

What is Goods and Services Tax (GST), and why is it included in a tax invoice

Goods and Services Tax (GST) is a consumption tax or an indirect tax that the Inland Revenue Authority of Singapore (IRAS) levies on selling goods and services. It is also collected on the import of goods. GST is an indirect tax expressed as a percentage of the sale price of the commodity or service. The current GST rate in Singapore is 7%.

If you are a GST-registered company, you will need to issue a GST tax invoice. You act as a collecting agent on behalf of the IRAS. When paying your business taxes, you will need to pay the GST amount to the government.

As a GST registered company dealing with another GST registered company, you must issue a tax invoice with GST. A GST invoice makes it easier for you to track the taxes you have collected and pay the government authorities.

Exemptions: When a Tax Invoice is Not Required 

All businesses in Singapore must issue tax invoices to record the services or goods provided and claim GST credits. However, a tax invoice might not be needed in the following situations. 

Minimum Threshold  

When a business provides services or goods below the threshold of S$200, attacks and voice are not needed. However, the business must still keep a record of this transaction for bookkeeping. 

Supplies Exempt from GST  

In Singapore, certain supplies are exempt from GST, such as the sale and lease of residential properties and certain financial services. Whenever GST is not charged, a tax invoice might not be needed, but invoices must still be issued for business record-keeping. 

Minimum Transaction Value  

In certain cases, especially if the transaction value for a single supply is less than S$1000, businesses are required to issue a simplified tax invoice instead of a standard tax invoice.  

Export of Goods or Services 

If goods or services are exported beyond Singapore's borders, GST on such transactions is zero-rated. Though tax invoices might not be needed, the business or exporter must maintain a detailed record of transactions to report GST. 

No GST Registration  

If a supplier's business is not registered for GST because its annual taxable income is below the registration threshold, it doesn't have to issue a tax invoice on its sales. 

Supply Between GST-Registered Businesses  

In certain instances, GST-registered businesses might agree to eliminate the requirement of a tax invoice and any supplies between them. However, they will still need to maintain a detailed record of transactions to report individual taxes. 

One important thing for all businesses is to maintain a proper, detailed, and organized record of all their transactions, regardless of whether a tax invoice is needed. 

Calculating GST on tax invoices

Now that you have a fair overview of an invoice, a tax invoice meaning and how it differs from a receipt, let's take a look at how to calculate a GST invoice.

There are two ways to calculate the GST amount on your tax invoice:

1. You could apply 7% GST to the value of each item and then add all the GST components
2. You could directly compute 7% on the total price of all goods and services sold

For example, let's assume you are a paper manufacturer. You make the following sale to another company:

• Five reams of A4 70Gsm copier paper at the rate of S$20 per ream
• 10 reams of A4 all-purpose premium quality paper at the rate of S$17.59 per ream
• Seven reams of A4 digital premium quality paper at the rate of $34.80 per ream

If you follow the initial GST invoicing method of computing GST on each item, then the calculation would be as follows:

As mentioned, you could also calculate GST on the total sales amount. The calculation would be as follows:

As you can see, there is a possibility that the GST invoice amount may vary under both circumstances due to rounding off. However, both methods are acceptable. The only condition is that you should use the methods consistently.

Tax invoice template

A tax invoice must have all the components required to qualify as a legal document. It must also provide details on zero-tax products, services, exempt goods, or other supplies. Here is a sample invoice from the IRAS website:

When should you issue a tax invoice?

If you are a GST registered company dealing with customers who are also GST registered, you must issue a tax invoice. As per IRAS rules and guidelines, you must send the GST tax invoice within 30 days of making a sale. Your customers will use your GST invoice as proof to claim input tax.

If your customer is not GST registered, and you are, you will still need to issue a GST tax invoice as proof for the GST that you have collected and must pay to the government. 

However, you do not have to issue a tax invoice in certain circumstances. If you are dealing with zero-rated products, such as the export of goods or international services, you do not need to issue a tax or GST invoice. Certain goods are exempt from GST, such as the sale and lease of residential properties or financial services.

If you are a business that is not registered with the IRAS and does not have a valid GST number, but your customers are registered, you can issue invoices without tax details to your customers. Simply mentioning that the goods or services are priced excluding GST will suffice.

Why should you issue a tax invoice?

You must issue tax or GST invoices to your customers if you are a GST registered company. It can help a registered vendor claim input credit while filing taxes. Tax invoices can help you determine the right time period for claiming the input tax. Even if you are a very small business, issuing a tax invoice can help you in the following ways:

Maintaining records

The primary advantage of issuing an invoice is keeping a legal record of any sale you have made. This makes it possible to keep track of who had bought the item, when you sold it, the price at which you sold it, etc. It is also easy to resolve disputes if you have these details on hand.

Tracking payments

Since an invoice contains details about the items sold and the corresponding price, it makes it easy for your accounting department to track payments. You can also use invoices to understand how much money you have received and how much is still owed to you.

Legal proof

An invoice is legal proof of sale that you have made to customers. In case of any dispute, they can be used to defend yourself. They are also valid documents to protect your business from fraudulent lawsuits.

Filing taxes

Keeping a record of all invoices also helps with tax filing as you can determine exactly how much you have sold and the amount of tax you have to pay.

Formulating marketing strategies 

Invoices can help you understand buying patterns, trends in sales, your most popular products, peak buying times, etc. Basically, you can understand customer behaviour with the help of invoices. Using this, you can frame better marketing strategies.

What is a simplified tax invoice?

A simplified tax invoice is a less detailed tax invoice that you can issue if your sale amount is less than S$1,000.

In a simplified tax invoice, you will only need to provide the following details:

• Your business's name
• Your business's billing address
• Your GST registration number
• An invoice number
• Description of the product or service sold
• Total amount payable, plus GST

You can also use a sales voucher or a debit note instead of a simplified tax invoice as long as it contains all the necessary details.

Introducing e-Invoicing in Singapore 

The Inland Revenue Authority of Singapore (IRAS) has announced a new proposal to introduce an electronic invoicing system to replace the existing paper or PDF invoices. This proposal was made under the purview of the GST InvoiceNow requirement that begins in May 2025. However, from 1 November 2025 onwards, this compliance is mandatory for any incorporated company with a voluntary GST registration. 

As per the e-invoicing initiative, all GST-registered businesses are required to directly transmit their invoice information to IRAS for tax purposes. This platform is based on the international Peppol standard to provide an automated, structured, and seamless transfer of invoicing information between businesses and IRAS. The primary benefits of adopting the e-invoice system include the removal of manual entry due to this platform's direct system-to-system data transfer. It ensures the standardization of invoice formats used by businesses everywhere in Singapore. Finally, it offers direct integration with IRAS for GST administration, reducing compliance errors.  

Final word

As a Singapore business that is GST registered, you need to send a tax invoice or a GST tax invoice to your customers for all standard-rated supplies. You do not need to send a tax invoice on zero-rated goods and services, exempt products or other deemed supplies that are not taxed under GST.

A tax invoice is just as crucial for your business as it is for your customer. You should hold on to your tax invoices for at least five years.

You can use Aspire's invoice management software to produce different kinds of invoices for your business. With features such as automatic reconciliation, tax compliance, auto-reminders for clients and automated cashflow insights, there's so much you can do with invoices generated via Aspire. It is the ideal invoice management software you need to make life easy for your accounting department and business in general.

Frequently Asked Question

How to make a tax invoice? 

A tax invoice must include the supplier and customer's names and addresses, GSTINs, an original invoice number, invoice date, an account of the goods/services provided, their quantity, value, the tax rate and amount, and the total amount payable. You can create a tax invoice manually or with invoicing software and templates.  

How do you differentiate between tax invoice vs. receipt? 

Receipts prove that the payment was successful, whereas a tax invoice provides information on the goods/service provided along with the tax details for the transaction.  

What is the difference between a regular invoice and a tax invoice? 

A standard invoice is raised to send request for payment for the goods or services processed by a business. A tax invoice is raised for taxation purpose to take advantage of a tax credit or some form of tax relief. 

How does a tax invoice differ from a bill of supply? 

A bill of supply lists the things or services that do not have to pay tax, while a tax invoice lists the amount of tax that is due on the sale. For getting an input tax credit, you need a tax invoice, but you can't use a bill of supply for this.