Singapore has maintained its reputation as a tax haven and expat paradise for decades now, so it is no wonder that the tiny city-state offers a favourable framework for cryptocurrencies. The rules and guidelines for taxation and the legal status of Bitcoin and Co. in Singapore are very transparent and a draft is set to ease the taxation on virtual currencies even more.
Cryptocurrencies in Singapore
The Inland Revenue Authority of Singapore (IRAS) recently published a draft on how they define cryptocurrencies as “Digital Payment Tokens” that have the following characteristics:
- It is expressed as a unit
- It is fungible
- It is not denominated in any currency, and is not pegged by its issuer to any currency
- It can be transferred, stored or traded electronically
- 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.
They also mention Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash as noticeable examples of digital payment tokens.
This draft will come into effect in January 2020, and as of now any type of cryptocurrency is still considered income or a service depending on what they are being used for. The following paragraph deals with the taxation that will be in force until then.
The Taxation of Cryptocurrencies in Singapore
For individuals, any income received in the form of virtual currencies is subject to income tax, which depends on your annual income and can reach a maximum of 22%. Singapore is notoriously known as very beneficial tax base for expats, so it is important to note that in order to be considered a tax resident you have to spend at least 183 days a year working or living in the country.
Any registered business in Singapore that accepts cryptocurrencies as payment is subject to income tax. Generally, income tax is applied to any income derived from or received in the country at flat rate of 17%, regardless of wether the company is based in Singapore or not. Businesses that trade cryptocurrencies will be taxed on the profit derived from trading virtual currencies. Mining is also considered a taxable source of income. However, businesses that use cryptocurrencies for long-term investments and make a capital gain from their disposal can enjoy the fact that these gains are not subject to taxation in Singapore as there is no capital gains tax.
Whether the realized gains are considered trading or capital gains is subject to discussion and depends on a variety of different factors, e.g. purpose, transaction frequency and holding periods. It is highly recommended to contact a tax advisor in Singapore for a thorough consultation on this issue
Cryptocurrencies as a Form of E-Commerce
As of now the supply of digital tokens ist still subject to Goods and Services Tax (GST) because it is considered a supply of service and is currently not tax-exempt. The GST is currently at a rate of 7%. Any transaction made through the use of virtual currencies is considered barter trade. However, if you pay someone outside of Singapore using cryptocurrencies or when you buy virtual goods and services in the gaming world you do not have to add the GST.
For any registered business selling virtual currencies the same rules apply: any sale of the cryptocurrency is considered to be subject to GST. Also, if you sell virtual currencies for someone else in Singapore you will have to apply GST to your commission fees. The only way in which the sale of Bitcoin and Co. can be considered GST-exempt is when they are sold to a person outside of Singapore.
Recent Developments
Recently, the IRAS proposed a draft stating that “the exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST” and is set to take effect from January 1st 2020. This will also mean that businesses trading with Bitcoin and Co. no longer have to be GST-registered even if the annual turnover is more that $1.000.000. However, stable coins that are pegged to a fiat currency will most likely not be GST-exempt. The IRAS wants to remove the GST from any crypto-related business as they feel that it does not go well with the fast-paced development and characteristic features of virtual currencies.
Free Crypto Tax & Portfolio Software
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Sources
https://www.coindesk.com/singapore-proposes-to-end-double-tax-on-cryptocurrencies
https://www.iras.gov.sg/IRASHome/GST/GST-registered-businesses/Specific-business-sectors/e-Commerce/#title5
https://www.iras.gov.sg/IRASHome/GST/GST-registered-businesses/Learning-the-basics/Goods-and-Services-Tax–GST—What-It-Is-and-How-It-Works/
https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/GST/Draft%20e-Tax%20Guide%20_GST_Digital%20Payment%20Tokens.pdf
