Inland Revenue Authority of Singapore (IRAS) has Published a draft guide that provides the information on how the goods and services taxes (GST) are implemented on the cryptocurrencies that are involved in the transactions during the exchange. The draft mainly refers to the cryptocurrencies – Bitcoin, Litecoin, Dash, Monero, Ripple, and Cash. These cryptocurrencies will not be subjected to GST under the new guidance, and people can use cryptocurrency to spend it like cash.
New Tax Rules On Cryptocurrency
As per the new draft it says, “Global development and growth in the use of cryptocurrencies have caused tax jurisdictions to review their GST position on cryptocurrencies transactions. Similarly, IRAS has reviewed its GST position to keep up to date with these developments. In particular, IRAS recognizes that taxing cryptocurrencies which function or are intended to function as a medium of exchange (that is, digital payment tokens) results in two tax points — once on the purchase of the cryptocurrency and again on its use as payment for other goods and services subject to GST.
To better reflect the characteristics of digital payment tokens, with effect from 1 Jan 2020, the supply of such tokens will no longer be subject to GST. The change in GST treatment does not represent IRAS’ endorsement of cryptocurrency investments.”
As per the draft, since there is an increase in interest of using cryptocurrency in people, new laws had to be drafted.
The draft also says that the GST taxes are not applied to the goods and services that are bought by the buyer through the cryptocurrencies. However, the seller has to keep an account on all of its transactions.
“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.”
While many of the countries are moving ahead with the cryptocurrencies, the people in the US still feel that it is complicated to spend the cryptocurrency and better rules are required in the country. Like for example if the cryptocurrency is spent on an object to buy then, the buyer is accountable for the tax, I.e., tax is calculated according to the price at which the buyer acquired the cryptocurrency and then at a price was it sold. And in many other countries like India, Cryptocurrency is still not legal.