Singapore appears to be ready to take a different approach on cryptocurrencies. The Inland Revenue Authority of Singapore (IRAS) has prepared regulations (in pdf)—still just a draft—that details the country’s goods and services tax (GST) in relation to crypto transactions and the result is good news for Bitcoin fans. If everything goes well, crypto user will be able to spend their assets just as if it were cash and the transactions would not incur any GST liability.
The draft is expected to take effect at the beginning of next year if it survives. The IRAS states that it has updated its policies in an effort to stay on top of the latest in crypto’s evolution and also because it realized that a GST on crypto transactions would result in two separate tax points—one when the purchase is made and another when it is used as currency to purchase goods or services.
With regards to merchant activities and how they manage crypto purchases, the IRAS explains, “If you are receiving digital payment tokens in return for your supply of goods or services and you are GST-registered, you would have to account for output tax on your supply of goods or services (unless the supply is an exempt or a zero-rated supply).
“GST-registered company A uses Bitcoin to purchase software from GST-registered company B. With effect from 1 Jan 2020, Company A will not be considered as making any supply of Bitcoins and thus, will not need to account for output tax. Company B will have to account for output tax on its supply of software.”
There are some exceptions, though. The tax authority points out that digital payment tokens would not include loyalty points, game credits or tokens issued on private blockchains. Additionally, any stablecoin or digital asset that is pegged to another currency is also excluded.
According to the IRAS, a digital asset will only be considered valid under the guidelines if it is fungible, not denominated in a currency or pegged to a currency, expressed as a unit and is intended to be a “medium of exchange accepted by the public, without any substantial restrictions on its uses as consideration.”
Prior to implementation, the policies will be discussed by the Ministry of Finance (MOF). As of last Friday, the MOF has been running a public consultation period in order to receive feedback on the digital tokens and the draft changes, and will accept input until July 26.
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