While some countries are actively acting against cryptocurrencies, others seem to be adopting a much friendlier attitude towards digital assets. One of the most recent countries to do so is Singapore, which just published a draft for an e-tax guide where cryptocurrencies that were used as a medium of exchange and were subjected to goods and services tax, would now be exempt from said taxes.
The guide explains the treatment for transactions involving virtual currencies or cryptocurrencies that function as medium of exchange. The current system treats the supply of digital payment tokens as a taxable supply of services, taxing the sale, issuing and transfer of such tokens. With the new regulation, which plans on going into effect by January 1st, 2020; digital payment tokens will no longer be subject to Goods and Services Tax (GST).
If the proposed guide is accepted, the current system will be suppressed and digital payment tokens will no longer be treated as a taxable supply of services. The main proposed changes to the current legislation are:
(i) The use of digital payment tokens as payment for goods or services will no longer give rise to a supply of those tokens. That is, if you use digital payment tokens to pay for the purchase of goods or services, you need not account for GST on the use.
(ii) A supply of digital payment tokens in exchange for fiat currency or other digital payment tokens will be exempt from GST. Therefore, the supply of such tokens, being an exempt supply, will not contribute to your annual taxable turnover for the determination of your liability for GST registration.
Furthermore, the document mentions Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Dash (DASH), XRP, and ZCash (ZEC) as cryptocurrencies that meet their definition of digital payment tokens that could function as a medium of exchange. It is unclear if the rest of cryptocurrencies in the market would also qualify as said tokens. Additionally, the document clearly excludes stablecoins from its definition, meaning they will continue to tax those under the previous GST legislation.
The proposed legislation will go into discussion, requesting feedback from businesses in the crypto industry to adapt it to the current reality of the market. In any case, all comments must be submitted before July 26, 2019.
