After observing the development in the crypto space, and different regions changing their stance regarding the use of the new form of currencies, the Inland Revenue Authority of Singapore (IRAS) plans to introduce new tax laws to govern cryptocurrency transactions.
Interestingly, the proposed rules contained in an e-tax guide published by the agency on Friday encourages the use of cryptocurrencies for transactional purposes, and notably wants the removal of the goods and services tax (GST) for such transactions.
Referring to cryptocurrencies as “Digital Payment Tokens” in the proposed legislative piece, the IRAS highlighted that the changes would better reflect the characteristics of these tools.
Although there are several cryptocurrencies available in the market now, the IRAS provided its standards for qualifying a cryptocurrency as a digital payment token.
To this end, the tax agency wrote that “examples of digital payment tokens are Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash.”
It is these kinds of cryptocurrencies the IRAS intends to exempt from GST when they are exchanged for another cryptocurrency or fiat currency
In other words, individuals and businesses would no longer pay taxes if they use cryptocurrencies as a means of exchange for transactions, while its usage for investment purposes remain taxable.
However, stablecoin (cryptocurrencies) pegged to fiat currency would not receive the GST exemption with the IRAS writing in this respect,
“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. For example, a digital token pegged to US dollars will not qualify as a digital payment token.”
The IRAS says the new tax laws if approved would come into force by January 2020, while crypto industry participants would have until July 26, to make contributions to the tax agency’s proposals.
Meanwhile, the Singaporean Ministry of Finance would deliberate on the same laws between now and the final date for submission of contributions by crypto industry participants.
Singapore last year also released guidelines for ICOs setting up shop within the country or selling tokens to its citizens.