There has been talk that Singapore might eliminate the goods & services tax (GST) associated with cryptocurrency transactions. The idea behind the move is to eliminate what is currently seen as a tax burden, with some transactions resulting in taxes being paid twice. If the proposal is accepted, it could have huge benefits to crypto enthusiasts, obviously, as less tax would have to be paid. However, there is another benefit that is expected. The entire Bitcoin ecosystem in Singapore would be given a boost.
The South China Morning Post reports that PriceWaterhouseCoopers (PwC) analysts indicate that the elimination of the 7% tax would put Singapore close to the same level as Hong Kong in terms of being a tax-friendly location for crypto enthusiasts and the entire industry. Gwenda Ho, a partner with PwC Hong Kong, asserts that GST change would spur innovation in the country and help lead the way to more local blockchain-centered services and solutions.
Ho adds, “In the past, when Singapore entities issued tokens through an initial coin offering, because the issuers did not want to incur extra compliance costs [through the GST], they would usually exclude Singaporean participants.”
According to the draft GST regulations, “The IRAS recognises that taxing cryptocurrencies which function, or are intended to function, as a medium of exchange (digital payment tokens) results in two tax points — once on the purchase of the cryptocurrency and again on its use as payment for goods and services subject to GST.” As a result, the GST on crypto is being considered for removal.
The change would be welcome and would help Singapore advance, but the country would have to do more if it wants to truly compete with Hong Kong for position. Ho explains, “While this proposal would improve Singapore’s competitiveness in its GST treatment on cryptocurrencies, Hong Kong in comparison is completely free of any sales tax so there is one less tax issue to be concerned about for cryptocurrency industry participants.”
Hong Kong and Singapore have laws that require businesses offering crypto assets and securities to pay corporate taxes on any profits earned from sources within their respective countries. However, between the two, only Singapore requires that a sales tax on crypto transactions be paid.
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