The legislation in Singapore, its taxation agency precisely, proposed the removal of goods and services tax (GST) from cryptocurrency transactions that supposed to function as a medium of exchange.
“Digital Payment Tokens” draft guide
Last Friday, The Inland Revenue Authority (IRAS) from Singapore issued an e-Tax draft guide with an attempt to excuse all entities dealing with such digital assets from the GST liabilities – called “Digital Payment Tokens’.
If this document reaches the legislation, starting the first day of the upcoming year, the resulting changes will consider the exclusion of some parts from GST, and effect to “better reflect the characteristics of digital payment tokens” in the following manners:
- The application of digital payment tokens as a way of payment for goods or services will not give increase to a supply of those tokens
- The exchange of digital payment tokens for fiat money or other digital payment tokens will be excluded from GST.
From the Inland Revenue Authority of Singapore explain, the e-Tax guide is still in its draft form. It is up to the Ministry of Finance, that will be taking a public consultation from this moment, until July 26 about the “legislative amendments for digital payment tokens.”
The sketch legislation guide also sets out details on how digital payment tokens are defined, like the fact it is expressed as a unit; it is fungible; it is not named in any currency, and is not pegged by its issuer; it can be transferred, stored or traded electronically. At least, it has the intention to be a medium of exchange accepted by the public, without any substantial limitations on its use as consideration.
Stablecoins will not be qualified to be GSP exempt
The government agency also specified that stablecoins, a type of cryptocurrency with a value tightened to a fiat currency, may not be eligible to be GST exempt. All digital tokens that are denominated in any kind of fiat currency or with a value tightened to fiat money will not be eligible as a digital payment token, says the IRAS’ draft about GST. They gave an example in digital token related to the US dollar, that will not be sued as a digital payment token.
The attempt to complete GST liabilities considering digital currencies follows global development and growth of cryptocurrency, that is the industry led by various jurisdictions around the world. IRAS has reviewed its GST position to stay updated with events.
The supply of digital payment tokens is taxable
Under the current legislation frame, the supply of digital payment tokens is still regarded to be the taxable supply of services. Therefore, in order to sell, issue, or transfer such tokens for payment by a GST registered business, is subject to GST. When they are used as payment for buying goods or services, a trade resulting in two separate supplies stands — a taxable amount of the tokens and a supply of the products or services.
To recall, two years ago, lawmakers in Australia passed a legislation document to finish what was called double taxation, exempting the liability for paying goods and services tax (GST) on for buying cryptocurrencies.