The Inland Revenue Authority of Singapore (IRAS) published a draft e-tax guide in which it proposes that crypto which are to be used as means of payment to be exempted from Goods and Services TAX (GST) – a local equivalent of VAT.
Details of the proposal
Should the proposed idea be adopted it will become efficient as 2020 begins, in early January.
It is expected to completely change the current system and give up treating tokens used for online payments as goods and services to be taxed.
In the draft guide, the IRAS says that presently, crypto coins that are used as a medium of exchange are considered to be utilized for barter trade.
Two different supplies emerge as an outcome of their use: a supply of taxable tokens and a supply of relevant goods and services.
IRAS calls Bitcoin, ETH, LTC, XRP and a few other crypto assets coins that live up to the definition of crypto tokens designed to be used as a means of payment, not goods.
Fiat-backed stablecoins are left beyond the definition of virtual payment tokens, which means that such stablecoins will still be taxed under GST in 2020.
Crypto mining rewards also to be exempted
Speaking of mining Bitcoin, Ethereum and other virtual currencies, the IRAS suggests that token rewards that come as a result of mining should also be tax-free.
There is generally no sufficiently close nexus between the service provided by the miner to the persons whose transactions are verified, and the mined tokens that the miner received from the blockchain ecosystem. The parties paying the mined tokens are also not identifiable.”
Feedback expected to come in
After the Singapore taxation authority has published the document, it expects companies from the crypto industry to file their feedback until the end of this month – 26 July, in particular.