The Singapore Revenue Service will not levy taxes on free distributed crypto assets and coins resulting from forks. Other crypto assets are still taxable.
The new management of the Internal Revenue Authority of Singapore (IRAS) has filled in the gaps in tax reporting related to digital tokens: payment tokens, instrument tokens and stock tokens. Each token now has a new definition and corresponding tax treatment from IRAS.
This guide is intended for both consumers and businesses, as well as ICO issuers, and describes a fragmented approach for the industry. The tax manual explains the procedures for various crypto-related situations. For example, IRAS will not levy income tax on payment tokens received by the user as part of a free distribution as well as on coins resulting from the fork of the block.
The IRAS manual recognizes payment tokens, e.g. Bitcoin, as "intangible property" and not as legal tender. If a consumer pays to the BTC, he or she participates in a "barter trade" where goods and services are taxed, not the payment token itself.
The situation is more complicated when the tax burden of the goods or services originally assessed in the crypt currency is determined. For example, a contractor who agrees to do the work for 3 BTC cannot accurately calculate the tax because IRAS has no "methodology for assessing payment tokens". Therefore, IRAS obliges taxpayers to independently determine a "reasonable and verifiable" exchange rate using major trading platforms such as Coinbase and Binance.
By contrast, operations with instrument tokens are unlikely to cause a tax-deductible event for the user. Their acquisition as a right to future services will be considered as a prepayment. The use of payment tokens will be considered a tax-deductible event.
Payment tokens are treated according to the same taxation laws that apply to other securities. Singapore does not levy capital gains tax on any security and taxes dividends depending on the issuer. Thus, token shares are taxed only when they are classified as "earning assets".
Singapore's taxation scheme leaves issuers of token shares under the ICO (STO) with the full amount of funds raised. However, instrumental tokens issued under an ICO are treated differently. Such revenue actually represents future income, which is taxed immediately after delivery. Issuers of payment tokens must pay tax immediately, although the manual states that such schemes are "unusual". IRAS notes:
"Payment tokens issued under ICO may require a more detailed study of the situation".
Recall that last summer the Singapore Tax Agency offered to exempt from tax on goods and services transactions with cryptov currencies, which are intended to act as a means of exchange.
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