Singapore - Setting Up A Crypto Entity

Singapore - Setting Up A Crypto Entity

Singapore offers one of the most business-friendly environments for crypto entities, with a transparent taxation system offering the benefit of no capital gains tax, as well as a modern regulatory framework encompassing a wide range of activities related to the financial system. 

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  • What do I need to do to set up a “crypto fund” in Singapore?


    • Step 1: Incorporation of a Singapore Legal Entity

      A popular fund structure would be the Variable Capital Company for the “crypto-focused fund”. The Legal Entity could be a Variable Capital Company, Unit Trust, Limited Partnership and Limited Liability Company.

      Step 2: Obtain the relevant licences

      Fund Management Licence

      For an overview on fund management licences, entities engaged in fund management activities must hold either a Capital Market Services (CMS) licence for fund management as a Licensed Fund Management (LFMC) or a Venture Capital Fund Manager (VCFM), be registered as a Registered Fund Management Company (RFMC) or be expressly exempted from holding a CMS Licence, in the case of the Single Family Office (SFO).

      The licence required would depend on the investor restrictions and quantum of assets under management which the fund intends to market and manage. Note that in Singapore, crypto funds are not authorised for sale to retail investors.

      The entity should satisfy MAS that its shareholders, directors, representatives and employees, as well as the FMC itself, are fit and proper, in accordance with the Guidelines on Fit and Proper Criteria issued by MAS.

      Payment Services Licence (if applicable)

      If the crypto fund intends to operate a platform an exchange to offer crypto and digital token/fiat exchange related services, this may constitute as providing a "Digital Payment Token" service under the Payment Services Act. Hence, a Payment Institution License (PIL) is required and certain requirements must be met in order to apply for the PIL.

      Financial Adviser Licence (if applicable)

      Where the crypto fund manager offers financial advice in respect of digital tokens as an investment product, a financial adviser's licence must be obtained, unless exempted, under the Financial Advisers Act (Cap. 110).

      Step 3: Prepare the fund documentation

      To carry out the crypto fund's business activities, the rights and obligations of the relevant parties should be set out in writing. Such documents include but are not limited to subscription agreement, private placement/information memorandum, investment management agreement, administration agreement and custodian agreement.

    FinReg business tip

    Digital assets are intangible and stored in a digital format and include cryptocurrencies and crypto tokens. Crypto funds / Crypto asset management pertain to the monitoring and trading of crypto-assets on blockchain technology.

  • How are cryptocurrencies taxed in Singapore?


    • "It depends on the type of activity that is being carried out:
      For trading in cryptocurrency in the ordinary course of business, profits would be subject to income tax.
      For purchase of cryptocurrencies for long-term investments, capital gains would not be subject to tax.
      For payment of cryptocurrencies for goods or services, the provider of the goods or services would be taxed on the value of the goods or services because the cryptocurrencies would be treated as intangible property and not legal tender."

      Income Tax Treatment of Digital Tokens 

      For Income Tax purposes:

      According to IRAS
      last revised on 17 November 2021

      Tax Treatment of Digital Tokens
      Businesses that choose to accept digital tokens such as Bitcoins for their remuneration or revenue or that trade in digital tokens are subject to normal income tax rules.
       
      Digital Tokens Received as Payment
       
      Businesses that choose to accept digital tokens such as Bitcoins for their remuneration or revenue are subject to normal income tax rules. They are taxed on the income derived from or received in Singapore. Tax deductions are allowed, where permissible, under our tax laws.
       
      Generally, these businesses should record the sale based on the open market value of the goods or services in Singapore dollars. The same applies for businesses which pay for goods or services using digital tokens.
       
      If the open market value of the goods or services that would have otherwise been exchanged in Singapore dollars cannot be determined (e.g. the good or service is only traded with digital tokens), the digital token exchange rate at the point of the transaction may be used.
       
      Learn more about the tax treatment of digital tokens received as payment (PDF, 236KB).
       
      Buying and Selling Digital Tokens
       
      Businesses that buy and sell digital tokens in the ordinary course of their business are taxed on the profit derived from trading in the digital token. Profits derived by businesses which mine and trade digital tokens in exchange for money are also subject to tax.
       
      Businesses that buy digital tokens for long-term investment purposes may enjoy capital gains from the disposal of these digital tokens. However, as there are no capital gains taxes in Singapore, such gains are not subject to tax.
       
      Whether gains from the disposal of digital tokens are trading or capital gains depends on the facts and circumstances of each case. Factors such as purpose, frequency of transactions, and holding periods are considered when determining if such gains are taxable.
       
      Learn more about the tax treatment of digital tokens (PDF, 236KB).
       
       
       
       
       
  • How to set up an offshore company in Singapore?


    • Incorporating an offshore company in Singapore is done online via the BizFile+ portal managed by the Accounting and Corporate Regulatory Authority (ACRA).

      Since a SingPass ID is required to log into BizFile+, foreign companies may need to engage the services of a registered filing agent (e.g. a law firm, accounting firm) to incorporate the offshore company for them.

      The following information is generally required to incorporate an offshore company in Singapore:

      • Name of the proposed company
      • Brief description of business activities
      • Shareholders’ particulars
      • Directors’ particulars
      • Registered address of the company
      • Company secretary’s particulars
      • Company constitution
      • Any other documentary requirements as may be required by the registered filing agent

      It may also be useful to note the following requirements for incorporating an offshore company in Singapore:

      • At least 1 of the offshore company directors must be ordinarily resident in Singapore.
      • Directors must be at least 18 years old and must not have been an undischarged bankrupt or convicted of any offence involving fraud or dishonesty.
      • The offshore company must have a registered office physically in Singapore where communications or notices may be addressed.
      • The offshore company must appoint a Singapore resident to act as the company secretary within 6 months of incorporation.
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