Singapore wants to make cryptocurrency transactions more convenient, and its plans are set to be stamped into law. Late last week, the Inland Revenue Authority of Singapore (IRAS) published an , which revealed that the government is working on a plan to exclude certain forms of cryptocurrencies from the Goods and Services Tax (GST).
For better context, the Goods and Services Tax is Singapore’s take on Value Added Tax (VAT). The IRAS revealed in the e-Tax guide that the GST, ideally applicable to any form of digital asset transfer, will now exclude those crypto-assets intended to act as a means of exchange.
If accepted, the proposed exemption will take effect from the first day of 2020 and will bring a fundamental change to a system where crypto tokens are ideally treated as services. Ergo, these transfers are legally taxable.
The IRAS explained in the guide that the supply of exchange-focused crypto assets has been treated as a form of barter trade. This form of transfer leads to two separate supplies to the taxation authority; one party receives the goods and/or services in question, while the counterparty receives the token which is taxable.
However, under the proposed rule, it was explained that paying for goods and/or services with digital tokens won’t necessarily lead to a supply of the crypto tokens used in the exchange. In addition to that, the GST will also not include the exchange of “digital payment tokens” for other digital payment tokens or fiat currency.
In the guide, the IRAS provided clear parameters on the definition of digital payment tokens, saying that they should meet the characteristics of unit expression, fungibility, transferability (and electronic trading), a lack of an underlying currency peg, and general acceptability as a medium of exchange “without any substantial restrictions on its use as consideration.
By this definition, crypto-assets such as Bitcoin, XRP, Ether, DASH, Litecoin, ZCash, and Monero have been identified as digital payment tokens and have now been cleared to operate as exchange media. This is great news for those who trade and transfer funds from Bitcoin wallets. The definition also means that stablecoins and other fiat-pegged digital assets won’t function as digital payment tokens, so their transactions- whether in stock trading or simple transfers via cryptocurrency exchanges– would still be subject to the GST after January 2020.
According to the release, e-Tax is still in the draft stage. However, the country’s Ministry of Finance is also set to be holding a public consultation until July 26, during which the “legislative amendments for digital token payments” will be discussed, and feedback can be submitted by businesses within the country’s crypto industry.
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