The Internal Revenue Authority of Singapore (IRAS) has published new crypto tax guidelines indicating a tax exemption for hard forks and airdrops. Also, the guide outlines Singapore’s tax treatment scheme for digital tokens and securities.
IRAS Guide on Digital Tokens and ICOs
Singapore’s tax office has issued revised policies regarding the taxation of digital tokens and ICOs. The IRAS revealed the policies via a new e-tax guide published on Friday (April 17, 2020) dubbed “Income Tax Treatment of Digital Tokens.”
According to the guide, three categories of cryptos have been identified to fall under the purview of the IRAS’ taxation policy – payment tokens used to purchase products and services, utility tokens which serve as a representation of rights to food and services, and security tokens.
The IRAS has indicated that the guidelines are geared towards clarifying issues about income tax levied on cryptocurrencies. An excerpt from the guide read:
“The general income tax treatment for digital tokens is to be determined based on the nature and use of digital tokens, rather than the label that the tokens take. We recognize that the technology for digital tokens is constantly evolving and the nature of digital tokens may vary over time.”
Regarding the matter of payment tokens such as Bitcoin (BTC), the IRAS has mandated cryptocurrencies to be treated as intangible property instead of legal tender.
Therefore, taxation levied on transactions involving payments in cryptocurrencies such as BTC will fall on the goods or services being purchased, and not the payment token itself. The IRAS identifies such transactions as ‘barter trade.’
Furthermore, security tokens fall under the same flexible tax laws regulating other non-crypto securities under Asia’s tax haven. However, ICOs issuing payment tokens and utility tokens will be taxed differently, per the IRAS e-tax guide.
No Taxes Levied on Hard Forks and Airdrops
The tax guide pointed out that the IRAS will not levy income taxes on airdropped cryptocurrencies as long the recipient is required to pay zero transaction fees. Also, payment tokens and cryptocurrencies obtained from a blockchain’s hard fork will not be taxed. The handling of hard forks and airdrops has been a contentious issue for crypto pundits who argue that regulators are yet to understand the dynamics of both events.
In other jurisdictions, tax offices have modified their regulatory schemes to include cryptocurrency taxation policies. As previously reported by BTCManager, South Korea planned to implement a 20 percent income tax on profits made from crypto trading and transactions.
The United States Internal Revenue Service (IRS) reportedly organized a crypto tax summit with industry stakeholders back in March 2020 as parts of its plan to adopt stricter crypto regulatory enforcement.