Singapore taxation agency on Friday published a report, proposing exemption of goods and services tax (GST) on cryptocurrency transactions “that function or are intended to function as a medium of exchange.”
In the e-Tax guide draft titled “GST: Digital Payment Tokens,” the Inland Revenue Authority of Singapore (IRAS) is seeking to exempt GST on digital currencies that are used as a mode of payments.
“The use of digital payment tokens as payment for goods or services will no longer give rise to a supply of those tokens. That is, if you use digital payment tokens to pay for the purchase of goods or services, you need not account for GST on the use,” the tax agency added.
“A supply of digital payment tokens in exchange for fiat currency or other digital payment tokens will be exempt from GST. Therefore, the supply of such tokens, being an exempt supply, will not contribute to your annual taxable turnover for the determination of your liability for GST registration.”
If passed, the proposed draft will turn into a law which will come into effect from January 1, 2020. But before any official debate, the Ministry of Finance of the city-state is seeking public consultation on the move till July 26.
A bold, yet calculated move
The draft also detailed the eligibility criteria of any cryptocurrency to fall under the category of digital payment token.
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“A digital payment token is a digital token that has the following characteristics: it is expressed as a unit; it is fungible; it is not denominated in any currency, and is not pegged by its issuer to any currency; and it is, or is intended to be, a medium of exchange accepted by the public, without any substantial restrictions on its uses as consideration,” the draft stated
“Examples of digital payment tokens are Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple and Zcash.”
The agency also clarified that it would not consider any fiat-pegged token as a digital payment token.
“A digital payment token must not have a value that is based on the value of anything else. Therefore, 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,” the draft added.
Last month, a senior executive of the Monetary Authority of Singapore (MAS) told Finance Magnates that regulators should look at the risks posed by cryptocurrencies when trying to regulate them.