Crypto mining regulations
Are gains from crypto mining subject to tax in Singapore?
It depends on on how IRAS classifies the purpose of your crypto mining:
"Crypto mining in Singapore is subject to taxation if the miners are actively using it as a source of income. This is defined by the IRAS as a a ‘habitual and systematic effort to make a profit from the activities’.
On the other hand, those who engage in mining on a recreational basis aren’t liable to pay taxes when they dispose their earned crypto assets."
last revised 9 October 2020
The taxability of a miner’s profits from the disposal of payment tokens (including those obtained from a mining pool) depends on whether the miner performs the mining activity with an intention to profit. Miners may perform mining as a hobby or to hold the tokens mined as a long-term investment. If so, the disposal gains/ losses of the payment tokens are not taxable/ deductible. On the other hand, gains/ losses from the disposal of payment tokens by a miner assessed to be trading in nature would be taxable/ deductible.
Likewise, if a miner is paid a fee to perform the mining activity, he could be taxed on the fee received (see Scenario E below).
The miner’s profits (if any) will be taxed at the point of disposal of the payment token and not at the point when the payment token is successfully mined. This is because while the miner is entitled to a right to own a payment token at the point of successful mining, no income is derived by merely holding the payment token.
Treatment for Companies: As a company is generally set-up with a profit-seeking motive, a company engaging in mining activities will be regarded as carrying on a business of mining and general tax rules will apply. It will be allowed to claim deduction on its mining expenses on an “incurred” basis from the date of commencement of business. This refers to the date that the business has established its profit-making structure and started its first commercial activity.
- Indications that a mining business has commenced include:Mining equipment purchased
- Sale of mined digital tokens
A company will be taxed on profits from the sale of mined payment tokens upon disposal of the tokens.
Treatment for Individuals: Prima facie, an individual engaging in mining activities will be considered as undertaking the activity as a hobby. Gains from sale of the mined payment tokens are treated as capital gains and are not taxable. Mining expenses will not be deductible.
However, if an individual shows a habitual and systematic effort to make a profit from the activities, he may be considered as carrying on a vocation of a miner and his profits from the sale of the mined tokens will be subject to tax