The Inland Revenue Authority of Singapore (IRAS) has unveiled its plans to potentially exempt digital assets from the Goods and Services Tax.
Under current legislation, cryptocurrency users are taxed twice when they use tokens to pay for goods and services, as these transactions are seen as a ‘barter trade’; the supply of the digital token and the supply of goods and services purchased by the digital asset.
The IRAS recently published a draft version of an e-Tax guide to govern the treatment of ‘digital payment tokens’ and ‘better reflect the characteristics of digital payment tokens’.
Singapore’s Ministry of Finance will be holding a public consultation from now until July 26 to inform the draft e-Tax guide. If passed in legislation, changes could take effect from January 1, 2020.
The guide so far states;
(i) The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens.
(ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.
The IRAS listed Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash as examples of digital payment tokens.
Stablecoins however, which are pegged to the value of a fiat currency, will not qualify as GST exempt under the proposed changes.
“Any digital token that is denominated in any fiat currency or with a value pegged to any fiat currency will not qualify as a digital payment token,” the e-Tax guide states.
“For example, a digital token pegged to US dollars will not qualify as a digital payment token.”
Similarly, digital tokens that represent ownership rights to specific property will also remain subject to the GST.
The IRAS said it had started a review of its GST to keep up to date with jurisdictions across the world that were looking to review their legislations.
This includes Australia, which prior to removing GST, taxed Australian crypto users 10 percent GST for buying or selling digital assets and then another 10 percent for any goods and services transactions made with crypto.
To view the draft version of the IRAS e-Tax guide click here.