Government of Singapore Moves to ammend Tax Regulation for Cryptocurrency

In recent news, the taxation agency under the Singaporean government has moved to lift goods and services tax (GST) from cryptocurrency transactions; these cryptos function or are aimed to function as a medium of exchange.
Currently, most regulatory frameworks treat the supply of digital payment tokens is as a taxable supply of services. Last Friday an e-Tax draft guide was published by the Inland Revenue Authority of Singapore (IRAS). This guide was focused on treatment for what the IRAS has termed “Digital Payment Tokens,” and has sought to make an exemption from GST liabilities for any entity dealing with such digital assets. The guide is yet to be passed into legislation but if it is, by Jan. 1, 2020, the following changes will take effect to “better reflect the characteristics of digital payment tokens:”
(i) The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens

(ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.
According to the IRAS, the e-Tax guide is still in its draft form, and on the “legislative amendments for digital payment tokens.” the Ministry of Finance is said to be holding a public consultation up till July 26.

Detailed parameters on how digital payment tokens are defined have been set out by the guide hence, they should have all of the listed characteristics below:
a) Possibility of being expressed as a unit

b) Should be fungible

c) Should not be denominated in any currency, and not be pegged by its issuer to any currency

d) Can be transferred, stored or traded electronically

e) It is or is intended to be, a medium of exchange accepted by the public, or a section of the public, without any substantial restrictions on its use as consideration.
As the IRAS added proposal stated, “Examples of digital payment tokens are Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash,” adding “Any digital token that is denominated in any fiat currency or with a value pegged to any fiat currency will not qualify as a digital payment token,” the IRAS said in the draft. “For example, a digital token pegged to US dollars will not qualify as a digital payment token.” Inherently, a type of cryptocurrency called stablecoins designed to have a value pegged to fiat currency may not qualify for GST exemption.
The IRAS has indicated that worldwide development and growth in the crypto space has led various jurisdictions to review their stance regarding how cryptocurrencies are treated, thus launching their need to end GST liabilities on cryptocurrencies. A notable instance was from October 2017 when the lawmakers in Australia passed a piece of legislation to end “double taxation” exempting the liability for paying goods and services tax (GST) on cryptocurrency purchase. “Similarly, IRAS has reviewed its GST position to keep up to date with these developments,” the agency said.

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Credits – Wolfie Zhao

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