The Inland Revenue Authority of Singapore (IRAS) recently published a draft guide that detailed the conduct of goods and services tax (GST) towards cryptocurrency transactions, since there has been an increase in the use of cryptocurrencies as a mode of payment. The draft has referred, Bitcoin, Ethereum, Litecoin, Dash, Monero, Ripple(XRP) and Zcash as digital payment tokens.
According to the draft, under the new guidance, cryptocurrency users can spend their digital currencies like cash, as cryptocurrencies will no longer be liable to GST and this will come into effect from January 1, 202o.
The IRAS revealed that the GST position was reviewed in order to stay up-to-date with the latest crypto developments and it also recognized that taxing cryptocurrencies would result in two tax points, one during the purchase of cryptocurrency and the other when it is used as a payment method for other goods and services which are subjected to GST.
The draft also addressed the other side of the transaction, that involves the merchant to account for the sale. The draft read,
“If you are receiving digital payment tokens in return for your supply of goods or services and you are GST-registered, you would have to account for output tax on your supply of goods or services (unless the supply is an exempt or a zero-rated supply).”
“GST-registered company A uses Bitcoin to purchase software from GST-registered company B. With effect from 1 Jan 2020, Company A 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.”
However, digital payment tokens do not include game credits, loyalty points or and tokens issued on private blockchains. Stablecoins and digital assets that are pegged to other currencies are also out of the picture.Through the draft, IRAS also made it clear that the aforementioned change in the GST position does not represent IRAS’s endorsement of cryptocurrency investments.