Embracing automation in tax functions: Staying ahead of Singapore’s digital tax revolution

Singaporeans are no strangers to electronic government services. Over the years, the Singapore government has built a robust digital ecosystem that enables citizens and residents to access an array of government services online. In fact, these days, an individual is unlikely to step into a government office just to get administrative matters done in person. 

Of course, digitalisation is a continuous journey and one area where we can expect further progress is with regard to the data and information for indirect taxes that businesses provide to the Inland Revenue Authority of Singapore (IRAS).

Currently, Goods and Services Tax (GST)-registered businesses file periodic GST returns – usually on a quarterly basis – with IRAS. They report their business activities, including the amount of GST they have collected, GST due, or any GST refunds they may be eligible for. 

While businesses may use various accounting systems to collect transactional data, preparing GST returns is often a manual process which includes uploading the necessary information onto IRAS’ myTax Portal. If IRAS originates a tax audit, businesses must manually review and inspect documents to provide the required responses.

Recent announcements on the expansion of electronic invoicing, including mandatory direct data reporting, could significantly transform how businesses interact with IRAS in the future. These changes would bring about greater efficiency and transparency, particularly in tax reporting and audits. 

What is electronic invoicing?

Electronic invoicing, or e-invoicing, automates the digital exchange of invoice data directly between a vendor’s and a customer’s accounting systems. This data is transmitted through a third-party network or system which is sometimes administered by the government or tax authority. Unlike sending invoices as PDFs via email or through other traditional methods, e-invoicing enables seamless, secure, and efficient data sharing.

Outside of Singapore, e-invoicing adoption is increasing globally, in countries across Europe, Latin America and Asia. Based on current trends, it is likely that the vast majority of countries will mandate e-invoicing in some form or another for all business-to-business (B2B) transactions by the end of this decade.

Singapore’s e-invoicing implementation plans 

Singapore was an early adopter of e-invoicing by introducing the Pan-European Public Procurement OnLine (PEPPOL)-based “InvoiceNow” network in 2019, administered by the Infocomm Media Development Authority (IMDA). However, this model has a limited scope as it does not include any reporting requirements to IRAS.

To address this, IMDA and IRAS announced in 2024 a phased rollout of e-invoicing for all B2B transactions which incorporates direct invoice-level reporting to IRAS. This adaptation of the existing PEPPOL framework will be the first of its kind in the world and will be closely watched by other tax authorities seeking to enhance their own e-invoicing models.

Under Singapore’s proposed model, when a business transaction is initiated, the seller’s finance and accounting system will transmit invoice data in real-time to the buyer’s system through IMDA-accredited third-party access points connected to the PEPPOL network. 

This ensures that the data transmitted from the seller to the buyer is verified and validated. A subset of the data will then be forwarded to IRAS via the same access point or service provider, enabling IRAS access to the transaction-level data for audit or verification.

Singapore’s phased adoption means that the changes will not affect all businesses right away. A soft launch for pilot companies will take place on 1 May 2025, before being expanded to newly incorporated companies voluntarily registering for GST from 1 November 2025, and all other voluntary GST registrants from 1 April 2026. 

While the timeline for adoption across all businesses remains unclear, we expect that this phased approach will be expanded over the next few years.

Impact on Singapore businesses

Even as many businesses in Singapore are ahead of the curve in adopting digital solutions, the wider impact of e-invoicing needs to be considered. 

Firstly, systems and processes on both the front and back-ends will be impacted. Businesses will need to review their permanent (master) and transactional data to ensure that the information transmitted from enterprise resource planning (ERP) to billing systems are accurate in both format and substance. 

Additionally, customer and vendor management, alongside existing standard operating procedures, must be reassessed and adjusted where needed to establish robust and reliable processes along the e-invoicing transmission flow.

Businesses are also likely to incur time and costs to identify the most practical and efficient method to transmit data to the government, third-party network, and customers. 

Based on what we have observed in other countries, there are several approaches to this – some businesses opt to develop custom tools, others rely on their ERP provider for add-ons or pre-built tools designed for their systems, while others look to third-party vendors for external software that can interface across multiple financial systems.

Regardless of which approach businesses decide to adopt, it is important that they consider their implementation plans for e-invoicing and digitalisation as a whole.

The case for greater automation in tax functions

Tax is often treated as an afterthought for many organisations in Singapore, leading to insufficient investment in technology or automation and an over-reliance on manual processes and basic spreadsheets to handle complex transactions and calculations. 

As the government continues to advance its digitalisation efforts, businesses would do well to strengthen their own efforts as well.

With a lack of automation, business owners and heads of finance and tax may lack access to readily available, detailed, and accurate tax-related information, exposing them to risks such as making decisions without understanding the tax implications fully, under or over-reporting tax and not being able to provide the details for a transaction in a timely manner.

Additionally, for e-invoicing models involving data flows to the government, the tax authorities could potentially have access to more comprehensive and accurate data about a taxpayer’s business than the taxpayer themselves. 

Access to such comprehensive data, coupled with advanced analytics, will equip future tax auditors with far more powerful tools and capabilities than many in-house tax teams currently have, putting businesses at a potential disadvantage when it comes to providing timely and accurate responses to questions raised by the authorities as well as pre-empting or anticipating such queries in the first place.

Therefore, if businesses are able to ramp up tax-related automation, they will be in a better position to keep pace with the tax authority’s digitalisation focus.