Singapore’s government appears set to offer tax exemptions for bitcoin and other cryptocurrencies based on a draft document published by the country’s tax body. The proposed perpetual tax holiday will reportedly apply to virtual currencies deemed to be digital payment tokens and will come into effect in 2020 if approved.
GST Exemption for Bitcoin
The Inland Revenue Authority of Singapore (IRAS) — the country’s tax body released a proposed new regime for crypto-related goods and services tax (GST) on July 5, 2019. According to the document, the new tax paradigm for cryptocurrencies will include the following changes:
“The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens. The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.”
If passed, this statute would mean that GST-registered businesses in Singapore will no longer be subject to GST for transactions relating to the exchange of bitcoin and other cryptos for fiat.
GST is a mandatory value-added-tax (VAT) for all businesses in the country with a total taxable annual income above $1 million. Companies that earn lower revenues can also voluntarily register for GST according to the country’s tax laws.
The draft proposal revealed that the IRAS GST regime for cryptos would only apply to virtual currencies deemed to be digital payment tokens. As stated by the document, fiat-pegged tokens like stablecoins will not fall under the GST exemption for cryptocurrencies in Singapore.
This new tax treatment potentially changes the treatment of virtual currency transactions by the government. Given the emerging trend of establishments adopting crypto, the removal of the GST component from such transactions might spur greater penetration of Bitcoin payments in the country.