The Inland Revenue Authority of Singapore (IRAS) has proposed to exempt crypto from goods and services tax (GST). On Friday last week, the agency published an e-Tax draft guide on how to treat what it refers to as “Digital Payment Tokens.” In the publication, IRAS offers that any firm dealing with such digital tokens should be exempt from GST.
Should the draft guide pass into legislation, there will be changes that aim to better reflect the characteristics of digital payment tokens. These changes would come into effect as early as January 1 in the coming year.
Per the publication, these changes are,
(i) The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens.
(ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.
IRAS emphasized that the e-Tax guide is still in its draft form. The agency added that the Ministry of Finance would hold a public consultation starting July 5 to July 26. In so doing, the ministry aims to get the public’s opinions on legislative amendments for digital payment tokens.
The Definition of Digital Payment Tokens
According to the draft guide, a digital payment token should have the following features,
- a) It is expressed as a unit
- b) It is fungible
- c) It is not denominated in any currency, and is not pegged by its issuer to any currency
- d) It can be transferred, stored or traded electronically
- e) It is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, without any substantial restrictions on its use as consideration.
Per IRAS, stablecoins will not be exempt from GST liabilities.
A Bullish Move Towards Crypto Adoption
Different countries across the globe are changing their stance regarding the crypto sector. Similarly, Singapore’s IRAS has reviewed its outlook on crypto to stay updated with developments in the nascent industry.
The existing framework views the supply of digital payment tokens as a taxable supply of services. As a result, the sale, issue, or transfer of such tokens by a GST-registered business is subject to GST. Therefore, when the general public uses these tokens to buy goods or services, a barter trade that yields two different supplies arises. That is, a taxable supply of the tokens and a supply of the goods or services.
This news comes after Australian legislators passed a law to end double taxation. In so doing, they exempted purchases made using crypto from GST liabilities.
Do you think exempting crypto from GST will encourage mass adoption of the nascent sector? Let us know in the comments below.