Singapore’s government taxation agency has proposed to exempt cryptocurrency transactions from Goods and Service Tax (GST) that function or are meant to act as a medium of exchange. The news was shared by the Inland Revenue Authority of Singapore (IRAS) in a draft e-tax guide on July 5.
The e-tax guide that is titled “GST: Digital Payments Token,” insists on terminating GST liabilities for any business entity dealing with such digital assets.
The draft, if successfully passes the legislation, will take effect from January 1, 2020. The draft intends to alter the current situation wherein the supply of digital payment tokens is treated as a taxable supply of services.
Furthermore, the IRAS headlines that cryptocurrencies that are used as a medium of exchange are still seen as a barter trade that results in two of the following separate supplies – a taxable supply of the tokens and supply of goods and services respectively.
The IRAS guide outlines the subsequent changes to taxation rules –
“The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens, and (ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.”
IRAS asserts that the Ministry of Finance is inviting feedback and will be conducting a public consultation starting from July 5 until July 26, 2019 “on the legislative amendments for digital payment tokens.”
According to the draft, a digital token has to have the following characteristics:
“It is expressed as a unit; (b) it is fungible; (c) it is not denominated in any currency, and is not pegged by its issuer to any currency; (d) it 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; “
The IRAS mentions Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple, and ZCash as examples of cryptocurrencies that are efficient around to work as a medium of exchange.
Besides, the taxation agency excludes stablecoins from the aforementioned list of currencies, defining that these stablecoins will remain to be taxed under GST. “For example, a digital token pegged to US dollars will not qualify as a digital payment token,” IRAS added in the draft.
IRAS proposed in the cryptocurrency mining section that the latest rules will exempt token rewards earned by mining. IRAS stated in the draft – “There is generally no sufficiently close nexus between the service provided by the miner to the persons whose transactions are verified and the mined tokens that the miner received from the blockchain ecosystem. The parties paying the mined tokens are also not identifiable.”
However, IRAS adds that it is subjected to the taxable supply of services if a miner works with “identifiable party or parties, in return for a consideration.”
Earlier this year, Singapore’s Financial Authority, Monetary Authority of Singapore (MAS) warned its citizens to not be lured by fraudulent sites that seek investments in cryptocurrencies using fabricated information connected to the government.