The proposal of the Singapore government’s taxation agency to remove goods and services tax (GST) from cryptocurrency transactions could give a boost to the burgeoning sector, experts and industry participants claim.
Earlier this month, the Inland Revenue Authority of Singapore (IRAS) released an e-Tax draft guide outlining the tax treatment for “digital payment tokens” and unveiled its intentions to exempt cryptocurrency transactions from GST.
Both Hong Kong and Singapore have been wooing Asian crypto-enterprises, offering tax breaks to overseas companies that set up shop on their territory. However, Hong Kong is believed to have the edge in some respects, as cryptocurrency exchanges are totally exempt from paying sales tax.
The Inland Revenue Authority of Singapore is proposing to end the Goods and Services Tax that is imposed on cryptocurrencies.
Under the existing rules, users of cryptocurrencies are taxed twice when they use them to pay for goods and services. This is because the IRAS treats such a transaction as a barter trade that results in two separate cases of supply – a supply of the digital payment token as well as the supply of the services and goods paid for using the digital asset.
The proposed rules seem to suggest that as long as the token has the features of a digital payment token as defined by the guide, such proceeds from ICO could also be exempted from GST, said Ho.
Last year there were 650 ICOs globally, raising US$16.7 billion. But they have mostly dried up in Asia, industry participants said, as stricter regulations and the failure of many projects to take-off have halted their issuance.
To assist taxpayers, the IRAS has already outlined the qualities of digital payment tokens and this includes fungibility. Among the cryptocurrencies that the IRAS lists as qualifying to be digital payment tokens include Bitcoin, Ethereum, Dash, Litecoin, Monero, XRP and ZCash.