Singapore has been one of the few South Asian countries involved in boosting the presence of the cryptocurrency industry. Aside from being looking into the workings of the world of digital assets, the country has also been toying with blockchain technology.
A new release by the Inland Revenue Authority of Singapore talked about the tax laws that will govern payment tokens, utility tokens and security tokens. The body stated that there will be a new definition when it comes to the aforementioned taxes so that nothing is lost in translation between the government as well as crypto holders.
According to the latest e-tax guide proposed by the Revenue authority, it made better sense to tax the different tokens separately. The e-tax guide aims to provide guidance on the income tax treatment of transactions involving payment, utility or security tokens. The general income tax treatment for digital tokens is to be determined based on the nature and use of the tokens. This will ensure that the judgement is not based on the label that the token will take.
The latest report stated that Bitcoin and other payment tokens come under the ambit of intangible property. This negates its ‘legal tender’ tag customers paying for goods using Bitcoin will only be taxed on the good and not on the cryptocurrency. Singapore’s latest step was seen as a way to boost an industry that has been coming into its own over the past few months. The rate of adoption has slowed down because of COVID-19 but that only reinvigorated the true players in the industry.
Cryptocurrency holders in the past have found it difficult to calculate the tax rates for their holdings, a caveat clarified by the IRAS. The report detailed two steps to calculate an exchange rate that would best reflect the value of the receiving tokes. The two conditions were:
- The exchange rate must be reasonable and verifiable e.g. it is determined using an average of exchange rates available on payment token exchanges, such as Coinbase and Binance. Where the exchange rate is not available on exchanges, taxpayers can use other means to support their claim that the basis of the exchange rate used is reasonable.
- The methodology used to determine the exchange rate should be
consistently applied year on year.”
The latest rules also covered other events in the cryptocurrency space. In the future, the IRAS will not charge any income tokens against airdropped payment tokens or those that come from a blockchain hard fork. Changes were also made to the taxability process of ICO proceedings. The taxability of the ICO proceedings in the hand of the issuer depends on the rights and functions of the tokens issued by the investors.
Sources within the IRAS said that users can compare exchange rates using reputable platforms such as Coinbase or Binance. Singapore’s strict code of conduct has created a system where companies are made to double-check their processes before they can begin functioning within its borders. At the time of writing, Singapore does not levy capital gain taxes on securities. The only exception occurs when they come under the tag of “revenue asset”.