Singapore Will Not Tax Bitcoin Forks And Crypto Airdrops
Singapore’s tax authority will not levy taxes on free crypto assets and coins generated as a result of forks. Other crypto assets are still taxable.
The Inland Revenue Authority of Singapore (IRAS)’s has filled tax reporting gaps related to digital tokens:
- payment tokens;
- utility tokens;
- security tokens.
Each type of token now has a new definition and corresponding tax regime from the IRAS.
This guide is intended for both consumers and enterprises, as well as for ICO issuers, and describes a fragmented approach for the industry. The tax guide explains the procedures for various situations related to crypto-assets. For example, IRAS will not levy income tax on payment tokens received by the user as part of the free distribution. As well as coins that appeared as a result of a fork of the blockchain.
In the IRAS manual, payment tokens, such as Bitcoin, are recognized as “intangible property” and not legal tender. If a consumer pays in BTC, he engages in “barter trading”. Goods and services are taxed, not Bitcoin itself.
How to calculate crypto tax?
The situation becomes more complicated when determining the amount of tax on a product or service, originally estimated in cryptocurrency. For example, a contractor who agrees to do the work for 3 BTC cannot accurately calculate the tax because IRAS does not have a “methodology for evaluating payment tokens.” Therefore, the IRAS obliges taxpayers to independently determine the “reasonable and verifiable” exchange rate using large trading platforms, such as Coinbase and Binance.
Utility token transactions are unlikely to trigger a taxable event for the user. Their acquisition as a right to future services will be considered as an advance payment.
The use of payment tokens will be considered a deductible event from the tax base.
Security tokens are treated by the same tax laws that apply to other securities. Singapore does not levy capital gains tax on any securities. Tax dividends depending on the issuer. Thus, security tokens are taxed only when they are classified as a “returnable asset”.
Are ICOs taxed?
Singapore’s taxation scheme leaves the issuers of security token under the ICO the full amount of funds raised. However, instrument tokens issued as part of the ICO are treated differently. Such revenue represents future income that is taxed immediately after the delivery of the goods. Issuers of payment tokens must pay tax immediately, although the manual says that such schemes are “unusual”.
The IRAS notes:
«For payment tokens issued as part of the ICO, a more detailed study of the situation may be required».
Recall that last summer, the Singapore tax agency proposed to exempt from the tax on goods and services operations with cryptocurrencies, which are intended to act as a medium of exchange.
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