The Singapore government’s taxation agency has put forward a proposal to remove goods and services tax (GST) from cryptocurrency transactions that function or are aimed to function as a medium of exchange.
The news was published in a draft e-tax guide by the Inland Revenue Authority of Singapore (IRAS) stating that the supply of digital payment tokens in exchange for fiat currency or other digital payment tokens will be exempt from GST. Therefore, the supply of such tokens will not contribute to annual taxable turnover for the determination of liability for GST registration.
The agency has stated that the effort to end GST liabilities on cryptocurrencies follows worldwide development and growth within the crypto space, which has in turn led various jurisdictions to have reviewed their stance. Similarly, the IRAS has decided to review its GST stance to keep up to date with these developments.
Under the current legal framework, the supply of digital payment tokens is still seen as a taxable supply of services.
“Therefore, the sale, issue or transfer of such tokens for consideration by a GST-registered business is subject to GST. When the tokens are used as payment for the purchase of goods or services, a barter trade resulting in two separate supplies arises — a taxable supply of the tokens and a supply of the goods or services.”
The proposed exemption, if approved, will come into effect on January 1, 2020. The IRAS is currently receiving public comments from crypto-related businesses, which need to be submitted by July 26th.
According to the proposal, the following changes to taxation rules will take effect once it is approved:
- (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.
The draft further defines digital payment tokens as having the following characteristics:
“(a) 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; and (d) it is, or is intended to be, a medium of exchange accepted by the public, without any substantial restrictions on its uses as consideration.”
The agency cites Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Dash, Monero (XMR), XRP and Zcash (ZEC) as examples of digital payment tokens. Notably, IRAS excludes fiat-pegged crypto assets such as stablecoins from its definition of a digital payment token and will continue to be taxed under GST after January 2020.
Meanwhile, Singapore is not the only country considering exempting cryptocurrencies from GST taxes. In October 2017, lawmakers in Australia passed a piece of legislation to end what was called double taxation, exempting the liability for paying goods and services tax (GST) on cryptocurrency purchases.