Tax on crypto transactions

How should payment tokens be valued when paying tax?

According to IRAS (e-Tax Guide)

last revised 9 October 2021

... Currently, IRAS does not prescribe any methodology to value payment tokens. Taxpayers can use an exchange rate that best reflects the value of the tokens received, provided that the following two conditions are satisfied:

(i) The exchange rate must be reasonable and verifiable e.g. it is determined using an average of exchange rates available on payment token exchanges, such as Coinbase and Binance. Where the exchange rate is not available on exchanges, taxpayers can use other means to support their claim that the basis of the exchange rate used is reasonable.

(ii) The methodology used to determine the exchange rate should be consistently applied year on year.

5.5 IRAS retains the right to enquire into the valuation method used by taxpayers and taxpayers should be able to substantiate their valuation method with the relevant supporting documentation.

5.6 Payment tokens may appreciate or depreciate. If a change in fair value of the payment tokens is recognised in the financial statements for accounting purposes, such fair value gain/ loss will not be taxable/ deductible under current tax rules as the gain/ loss is not realized.

5.7 In addition, there may be situations where the gain/ loss on disposal of payment tokens is taxable, which are acquired over a period at different values/prices, e.g. when the taxpayer is a trader in payment tokens. For the purposes of computing the gain/ loss on disposal, IRAS will accept the First in first out (FIFO) or weighted average cost methods of valuing the payment token disposed1. This is in line with the Financial Reporting Standard for Inventories (FRS 2)/Singapore Reporting Standards (International) for Inventories (SFRS (I) 1-2).

1Last in first out (LIFO) method will not be acceptable.