Singapore Plans To Exempt VAT for Transacting in Cryptocurrencies
Singapore is on the verge of exempting cryptocurrencies that are meant to function as a medium of exchange from Goods and Services Tax (GST). It is equal to Value-Added Tax (VAT).
The news was made known via a publication made by the Inland Revenue Authority of Singapore (IRAS) on July 5th.
The exemption, if accepted, will take effect on January 1st, 2020, and will overhaul the current system wherein the supply of digital payment tokens is treated as a taxable supply of services.
According to IRAS, till now cryptocurrencies that function or are intended to do so (as a medium of exchange) have been treated as a barter trade that results in two separate supplies which are taxable token supply and a supply of the relevant goods and services.
The document lists the two proposed core changes to taxation rules in future as:
“The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens; and (ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.”
In its outline, the IRAS cites bitcoin, ether, litecoin, dash, monero, XRP and zcash as cryptocurrencies that meet its definition of a digital payment token designed to function as a medium of exchange.
The IRAS also excludes fiat-pegged crypto assets such as certain stablecoins from its definition of a digital payment token.
Under a section for cryptocurrency mining, the IRAS proposes that in most cases the new rules will exempt token rewards generated by mining, noting that:
“There is generally no sufficiently close nexus between the service provided by the miner to the persons whose transactions are verified, and the mined tokens that the miner received from the blockchain ecosystem. The parties paying the mined tokens are also not identifiable.”
It follows that if “a miner performs services to an identifiable party or parties, in return for a consideration, this constitutes a taxable supply of services,” according to the document.