Tax on crypto and crypto assets

"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).

According to IRAS

Businesses that buy and sell digital tokens in the ordinary course of their business will be 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 a capital gain 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 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.

According to IRAS

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.  

For Goods & Services Tax (GST) purposes, the following use of digital payment tokens are exempt from GST or disregarded as a supply:

According to IRAS
last revised on 25 August 2021

Supply of Digital Payment Tokens from 1 Jan 2020

Exempt Supply
The following supplies of digital payment tokens are exempt from GST:

• Exchange of digital payment tokens for fiat currency or other digital payment tokens

Example 1: Exchange of one digital payment token for another

You exchange Bitcoin for Ether from GST-registered company A. With effect from 1 Jan 2020, both your supplies are exempt from GST— your exempt supply of Bitcoin and A's exempt supply of Ether. Both of you do not have to charge or account for output tax. Instead, both of you will report the net realized gain/loss from your exchange transactions as exempt supplies in your GST returns.

• Provision of loans of digital payment tokens

Example 2: Loans of digital payment tokens

You make loans of Digital Payment Token Z in return for interest income. With effect from 1 Jan 2020, you will report the interest received as your exempt supplies in your GST return.

Disregarded supply
The use/ provision of digital payment tokens as payment for anything (other than fiat currency or other digital payment tokens) is disregarded as a supply for GST purposes.

Whether digital payment tokens or fiat currency are used to purchase goods and services, GST is chargeable only on the supply of goods and services, unless the supply is an exempt, zero-rated or out-of-scope supply.

Example 3: Use of digital payment tokens as payment

You use Bitcoin to purchase software from GST-registered company B. With effect from 1 Jan 2020, you will not be considered as making any supply of Bitcoins and thus, will not need to account for output tax. Company B will have to account for output tax on its supply of software.

Please refer to GST: Digital Payment Tokens (PDF, 293KB) for more information on the characteristics of Digital Payment Tokens and the GST reporting requirements.

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.

Yes, transactions involving NFTs are taxable for income tax purposes. This has been explicitly clarified in parliament that NFTs are subject to income tax in Singapore.

"The prevailing income tax rules will apply to transactions of non-fungible tokens, or NFTs, said Finance Minister Lawrence Wong in Parliament on Friday (Mar 11)."

Source: Business Times, 11 March 2022

IRAS' stance on the sale and purchase of non-fungible tokens is as follows:

According to IRAS (e-Tax Guide)
last revised 19 November 2019

The GST treatment for digital tokens/virtual currencies/cryptocurrencies that do not qualify as digital payment tokens remain unchanged³. That is, supplies of such tokens will continue to be regarded as taxable supplies of services, unless they fall under the prescribed list of exempt financial services under Part I of the Fourth Schedule to the GST Act.

³For example, the transfer of non-fungible tokens such as those that represent ownership rights to specific property (e.g. intellectual property, digital artwork) will remain a taxable supply of services as such tokens are not fully interchangeable for use as consideration.

Do refer to the e-Tax Guide above for more specific guidance on the taxation of NFTs.

"There are no specific taxes levied against cryptocurrencies in the BVI. The BVI is a tax-neutral jurisdiction and does not have any withholding tax, capital gains taxes, income tax or corporate taxes at the time of writing. In the unlikely event that a BVI entity owns BVI situate land, the entity may be responsible for stamp duties.

Where there is an ICO or ITO, the exchange operators will need to be cognisant of the impact of the Foreign Account Tax Compliance Act (“FATCA”) and Common Reporting Standards, which will be relevant to determining the ultimate beneficial ownership of the BVI entity issuing the ICO or ITO. While these pieces of legislation will not be immediately relevant at the launch of the ICO or ITO, they will need to be considered as the BVI business company acting as the issuer starts to conduct business more generally."

Source: Carey Olsen, last revised 2020