The Singapore tax authorities have issued clarifications regarding the treatment of transactions in Bitcoins, the virtual currency.
The Inland Revenue Authority of Singapore responded to Coin Republic’s requests to clarify the tax treatment of the purchase and sale of Bitcoins, and in the words of David Moskowitz, Coin Republic’s founder, “the guidance which IRAS laid out is rational and well thought out.”
Singapore’s initiative to clear the air on this issue is one of the first of its kind in the world. Take note, however, that the guidelines merely view the virtual currency as just another product, or investment, changing hands and do not accord any official recognition to the virtual currency (VC).
Singapore’s stand on VCs
Singapore’s stand on VCs has been consistent:
- VCs are not legal tender in Singapore
- In Singapore, only the Monetary Authority of Singapore (MAS) has the sole right to issue currency and coins that are legal tender
- VCs are also not considered as securities under the island’s Securities and Futures Act, and therefore VC exchanges are unregulated by the Singapore authorities
Last month, MAS clarified its “hands-off” approach in an email, again to Coin Republic, saying “Whether or not businesses accept Bitcoins in exchange for their goods and services is a commercial decision in which MAS does not intervene.”
Earlier, the island country had cautioned consumers on Bitcoin, and a spokesman for the MAS had said in September that “If Bitcoin ceases to operate, there may not be an identifiable party responsible for refunding their monies or for them to seek recourse.”
Singapore’s Bitcoin taxation guidelines
Here are the main features of Singapore’s taxation policy on Bitcoins:
- Since Bitcoins are neither a currency nor money, transactions will attract taxation as those of ‘goods’ or ‘services,’ and not as an exchange of currency.
- Where the Bitcoins are held as long-term investments, any profits thereon would be ‘capital gains,’ which are tax-free in Singapore.
- Where Bitcoins bought or sold by paying/receiving real money, the transaction would attract GST as it would constitute a taxable supply of services by the seller.
- Where Bitcoins are used to purchase real goods or services, the transaction is recognized as a ‘barter exchange’ and GST would apply.
However, there is a view that the guidelines would subject Bitcoins to multiple taxation at various points of the transaction chain.