Singapore Releases New Draft on Tax Guidelines for Crypto: Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash
The Inland Revenue Authority of Singapore (IRAS) has published a draft guide that explains the goods and services tax (GST) treatment for transactions involving cryptocurrencies that are used as a medium of exchange. Referred to as digital payment tokens, the draft references Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple (XRP) and Zcash as examples. In a major step forward for cryptocurrency supporters and for people who want to spend their crypto like cash, under the new guidance, cryptocurrencies will no longer be subject to GST.
The lawmakers acknowledge an increased interest in cryptocurrencies and have adapted the tax framework to support the growth of the industry.
“Examples of digital payment tokens are Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash.”
“Global development and growth in the use of cryptocurrencies have caused tax jurisdictions to review their GST position on cryptocurrencies transactions. Similarly, IRAS has reviewed its GST position to keep up to date with these developments. In particular, IRAS recognises that taxing cryptocurrencies which function or are intended to function as medium of exchange (that is, digital payment tokens) results in two tax points — once on the purchase of the cryptocurrency and again on its use as payment for other goods and services subject to GST.
To better reflect the characteristics of digital payment tokens, with effect from 1 Jan 2020, the supply of such tokens will no longer be subject to GST. The change in GST treatment does not represent IRAS’ endorsement of cryptocurrency investments.”
According to the draft,
“If you are paying digital payment tokens in return for goods and services, you need not account for output tax.”
On the other side of the transaction, a merchant will have to account for the sale.
“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.”
The definition of a digital payment token does not include stablecoins or digital assets pegged to other currencies. Game credits, loyalty points and tokens issued on private blockchains are also excluded.
Meanwhile, lawmakers in the US are also pushing for policies that will make cryptocurrencies easier to spend. The Internal Revenue Service is expected to issue new guidelines on cryptocurrencies soon, updating guidance that was last issued in 2014.
Crypto supporters hope to see clarity surrounding the use of digital money, particularly with respect to the capital gains tax.
Cryptocurrency enthusiasts in the US argue that current guidance has been stifling mainstream interest and adoption of digital money. In short, crypto is just too complicated to spend. Buying a cup of coffee with Bitcoin, for example, could trigger a taxable event because the current tax law states that if you spend Bitcoin you have to calculate the price at which you acquired the Bitcoin and then the price at which you sold it – when you bought the coffee – and then apply capital gains tax rules. If you buy bread at the grocery store, a basketball at Walmart or sneakers at FootLocker, you could owe the government capital gains taxes on each and every transaction.
Says James Foust, senior researcher at Coin Center, the leading non-profit research and advocacy center focused on public policy issues facing cryptocurrency,
“[The rule] is so absurd that people just aren’t doing it.”
Foust is pushing for a policy overhaul that will make cryptocurrency spending and tax reporting more simple and fair.
“We are also continuing to advocate for the IRS to provide badly needed guidance on the open questions that are within its purview.”
Follow us on Facebook Join us on Telegram Follow us on Twitter
