Government of Singapore is planning to exempt the Goods and Services Tax (GST), also known as the Value Added Tax (VAT) in the United States, on all crypto transactions done in the country that is used as a medium of exchange. Tax exemption was proposed by the Inland Revenue Authority of Singapore (IRAS), in a document that was published on the authority’s website on Friday.
The document is a Tax guide for cryptocurrencies which refers to as “Digital payment Tokens.” The document plans to exempt all GST liabilities on crypto tokens that are used as a means of exchange to buy goods or services. The draft law proposes the following changes:
(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.
The draft has not been finalized yet and is still being negotiated. The IRAS said in a statement that the draft is being held by the Ministry of Finance, that is holding public consultation “for legislative amendments for digital payment tokens.” Public consultations will go on till 26th July. It is said that if the draft law is passed the new law will take effect on 1st January 2020.
Definition of Digital Tokens:
The draft law has defined the exempted digital tokens in detail, the parameters on how digital payment tokens are to be defined are:
“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.”
IRAS has also added the name of famous cryptocurrencies being used, “Examples of digital payment tokens are Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash.” Stablecoins, cryptos that have their values pegged to a certain commodity or a fiat currency are not exempted from these tax incentives, the proposal read:
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 Purpose of these Exemptions:
The IRAS admits that they have reviewed their stance on cryptocurrencies, and want to keep up with developments happening all around the world. The IRAS said that the whole world is accepting these tokens now and IRAS has also “reviewed its GST position to keep up to date with these developments”. However, the current framework still doesn’t exempt GST from these transactions and the GST still holds under the current framework the draft read:
“Therefore, the sale, issue or transfer of such tokens for consideration by a GST-registered business is subject to GST. When the tokens are used as payment for the purchase of goods or services, a barter trade resulting in two separate supplies arises — a taxable supply of the tokens and a supply of the goods or services.”