The Inland Revenue Authority of Singapore (IRAS) has set plans in motion to end goods and services tax (GST) on cryptocurrencies, thus promoting their usage for transactional proposes.
On Friday, July 5, the IRAS published draft guidelines seeking to end GST taxation on cryptocurrencies that function as a medium of exchange.
The proposal will receive public comments from cryptocurrency-related businesses until July 26 and will become effective from January 1, 2020, if it passes regulatory scrutiny by the country’s Ministry of Finance.
In the draft regulatory piece, the tax agency labeled cryptocurrencies, Digital Payment Tokens, and notes that in line with their characteristics, the use of digital payment tokens as payment for goods or services should not give rise to a supply of those tokens.
Then, the IRAS proposed that the “exchange of digital payment tokens for fiat currency or other digital payment tokens be exempt from GST.”
Which cryptocurrencies qualify for the tax exemption in Singapore?
The IRAS defined some of the parameters on which it defines digital payment tokens, namely:
a) it is expressed as a unit;
b) it is fungible;
c) it is not denominated in any currency and is not pegged by its issuer to any currency
d) it can be transferred, stored or traded electronically;
e) it is or is intended to be, a medium of exchange accepted by the public, or a section of the public, without any substantial restrictions on its use as consideration.
In line with these parameters, the regulators cited examples of digital payment tokens to include, “Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash.”
Stablecoins such which as pegged to fiat currencies do not qualify, as per the newly proposed tax laws.
Meanwhile, Singapore is not the only country considering exempting cryptocurrencies from GST taxes. Australia had passed a piece of legislation in October 2017 to exempt the payment of GST on cryptocurrency purchases.
Also, Germany exempts Bitcoin transactions from value-added tax (VAT), meaning that if you hold your bitcoin and probably other cryptocurrencies for one year, you are not taxed from an income point of view.
Additionally, Portugal exempts cryptocurrency from VAT tax and personal income taxes, although businesses need to pay taxes on any profits from cryptocurrency gains.
On the other hand, Coinfomania in the past reported that Chile is among the few countries with a tough crypto taxation stance, mandating traders, and investors to disclose their profits.