SINGAPORE Law and Practice Contributed by: Tju Liang Chua and Ulanda Oon, Drew & Napier LLC
Inland Revenue Authority of Singapore (IRAS) has also released specific guidance outlining how the legisla- tion applies to blockchain and cryptocurrency mat- ters. Revenue for Goods or Services Using Cryptocurrency Businesses that accept cryptocurrency as considera- tion are subject to taxes on their income as set out in the ITA. These transactions will be considered as barter trade, and the relevant revenue will be based on the value of the goods or services provided. Taxation will be based on net profits (after deducting allow- able expenses under the ITA). The current corporate income tax rate stands at 17%. Investing and Trading in Cryptocurrency Individuals or businesses that buy and sell crypto- currencies as part of their business will be charged income tax on profits derived from trading in crypto- currency. Profits derived by individuals or businesses that mine and trade cryptocurrency in exchange for money are also subject to income tax, as these will be considered revenue. However, individuals or businesses that invest in cryptocurrency for long-term investment purposes may be exempt from income tax for the disposal of these cryptocurrencies, as these will be considered capital gains (which are not subject to tax) rather than revenue. Distinguishing these two situations depends on the facts and circumstances of each case. When deter- mining if gains from disposable of cryptocurrency are taxable, factors such as purpose, frequency of trans- actions and holding periods are relevant. Taxes on Proceeds of an Initial Coin Offering (ICO) Taxes on ICO proceeds are dependent on whether the proceeds are considered as revenue and are sourced in Singapore. Generally, for an ICO of a utility token, ICO proceeds will be treated as deferred revenue (tax- able under the ITA). However, for an ICO of a secu- rity token, ICO proceeds will be capital in nature and therefore not taxable.
To ascertain if the activities giving rise to the ICO pro- ceeds are carried on in Singapore and if the income will be determined to be sourced in Singapore, the following factors (among others) will be considered: • whether the company has a physical presence in Singapore; • where and how the marketing and promotion of the ICO is conducted; • whether the participants in the ICO are predomi- nantly based inside or outside Singapore; and • whether the developers behind the blockchain technology are based inside or outside Singapore. GST on the Sale of Cryptocurrency Singapore has a value-added tax regime under the GSTA, whereby GST is levied on the supply of goods and services in Singapore and the import of goods into Singapore. GST is an indirect tax applied on the sale price of goods and services provided by GST- registered business entities in Singapore. The current GST rate is 9%. The supply of cryptocurrency that falls within the defi- nition of “DPTs” under the GSTA is no longer subject to GST. Specifically, the use of DPTs as payment for goods or services will no longer be construed as a supply of a service; GST need not be accounted for on their use. Furthermore, a supply of DPTs in exchange for fiat currency or other DPTs and the provision of any loan, advance or credit of DPTs will be exempt from GST. However, where tokens do not fall within the definition of DPTs under the GSTA, the tax treatment remains unclear. It is possible that GST can apply to the sup- ply of these tokens. If GST applies, the question as to when GST is payable becomes difficult. For instance, payment for such tokens may have been made as payment for future services or benefits. Crystallising the time at which the payment for such tokens can be considered to have been earned by the supplier of tokens (and GST chargeable at such point in time) may be challenging. 1.2.5 Insolvency Blockchain-based businesses are subject to the same winding-up and restructuring provisions under the
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