Singapore plans to exempt cryptocurrencies — the local equivalent of value-added tax (VAT) — that are intended to be the medium of exchange for the goods and services tax (GST).
On July 5th Singapore’s tax office (IRAS) published a draft of a new GST deal for cryptocurrencies used as a medium of exchange. Under current rules, the sale, issue or transfer of such tokens is subject to GST. When coins are used to pay for the purchase of goods or services, the whole transaction leads to two separate taxable supplies, namely, the taxable supply of tokens and the taxable supply of goods and services.
The document sets out two proposed core changes to future tax rules as follows:
(I) The use of digital tokens to pay for goods or services does not trigger a taxable supply of tokens. That is, if you use tokens to buy goods or services, they are not counted as consumption tax.
(ii) The purchase of tokens in legal tender or other cryptocurrency will be exempted from GST.
In its outline, IRAS refers to Bitcoin, Ether, Litecoin, Dash, Monero, XRP, and Zcash as cryptocurrencies that meet their defined digital payment tokens. IRAS clearly do not include legally linked crypto assets – such as some stable coins – from their definition of digital payment tokens, meaning they will continue to be taxed under GST after January 2020.
In a section devoted to cryptocurrency mining, according to AIRAS:
“There is generally no sufficiently close nexus between the service provided by the miner to the persons whose the transactions are verified. And the mined tokens that the miner received from the blockchain ecosystem. “On the contrary, “a miner performs services to an identifiable party or parties, in return for a consideration. This constitutes a taxable supply of services”
Tax authorities seek feedback from companies in the encryption industry on their proposed changes, which must be submitted by July 26, 2019.
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