Cryptocurrencies are increasingly being taxed as many countries continue to adopt Crypto regulation policies that classify Digital Assets as one of any other commodity that can be traded in the market in expectation of positive returns.
A similar law is in force in Singapore where Cryptocurrency transactions are subjected to the goods and services tax (GST) also known as the value-added tax (VAT) in other countries.
However, in a sharp twist of policy, the local tax agency has announced a proposal to lift taxation of Cryptocurrencies in a new tax guide titled “Digital Payment Tokens.”
The Proposal Would Be A Relief To Crypto Trading Platforms
The Inland Revenue Authority of Singapore (IRAS) is targeting to offer tax relief to companies that facilitate Crypto trading transactions as well as users and recipients of Digital Tokens.
The impact the proposal, once implemented, would enable Crypto hodlers to be relieved off taxing obligations that may lead to a negative return on investments in a bear market. Additionally, holders will find it convenient and financially worthwhile to use Cryptos to pay for goods and services.
The e-Tax Draft Recognizes Cryptos As A Medium Of Exchange
The IRAS draft is premised on the school of thought that Cryptocurrencies are mainly traded and handled for the medium of exchange purposes. Characteristics that define a Crypto according to the draft include; fungibility, expression as a unit, not pegged on a commodity, used as a medium of exchange, not pegged on a commodity.
This has been a controversial grey area for tax authorities in different countries as many policymakers in government circles believe that Cryptos are bought primarily for third returns on investment (ROI).
Since the beginning of the bullish cycle in the Crypto markets, most Cryptos have posted net returns on investments surpassing 100% which gives Digital Tokens a distinct characteristic of high-yield commodities that are better than gold, oil, diamonds, or even real estate properties.
Therefore, Singapore’s IRAS is offering a new perspective into the matter and redefining Cryptos as currencies. This decision is likely to be used as a reference by other taxation agencies to lift GST or VAT taxation of Digital Tokens transactions.
The Next Step Is To Pass The Proposal Into Law
The IRAS faces an uphill task of convincing lawmakers to pass the draft. This is due to the fact that this is a totally a new concept that challenges long-held assumptions about Cryptocurrencies.
Nonetheless, if the draft is adopted, it would be implemented from January 2020 and trading Digital Token pairs, as well as peer-to-peer exchanging of Digital Tokens, would be exempted from taxes.
Interestingly, the e-Tax paper gives examples of Digital Tokens that will be affected by the proposed law including Monero, Ripple, Litecoin, Dash, Bitcoin, Ethereum, and Zcash. Surprisingly, Stablecoins have been left out of the draft and their transactions would attract GST fees.
At the time being, the Singaporean Ministry of Finance is set to hold public hearings to get the views of stakeholders on the proposal. The timeline for public consultation run from Monday 8th July to 26th July and the topic of discussion has been revealed as “legislative amendments for digital payment tokens.”