Singapore’s tax authority will not take a cut of airdropped cryptocurrency so long as the recipient gets it for free, according to an income tax treatment guide published Friday.
The Inland Revenue Authority of Singapore (IRAS)’s new e-tax guide, published Friday, filled in the tax gaps for so-called “digital tokens,” a catchall for three crypto types: payment tokens, used to by goods and services; utility tokens, which represent a right to goods and services; and security tokens, or digital securities. Each has a new definition and corresponding tax treatment from the IRAS.
Meant as a guide for consumers and businesses, as well as ICO issuers, the guide describes a fragmented approach for an industry still coming into form.
The tax guide also clarified procedures for other obscure crypto events. For example, IRAS will not levy income taxes against airdropped payment tokens or those that come from a blockchain hard fork, which is a “windfall.” Like other payment tokens, non traditionally delivered cryptos will nonetheless be taxable on transactions.
IRAS’ guide considers payment tokens such as bitcoin to be “intangible property” instead of legal tender. If a consumer pays in bitcoin he is engaging in “barter trade” for which the goods and services are taxed, not the payment token itself. The same goes for businesses who can presumably value their goods’ tax burden against government-issued money metrics.
Where things get tricky is determining the tax burden of a good or service whose value is natively represented in crypto. A contractor who agrees to do a job for 3 bitcoins, for example, has no surefire to calculate the tax because the IRAS has no “methodology to value payment tokens.”
The IRAS therefore mandates that taxpayers self-determine a “reasonable and verifiable” exchange rate from widely-available services like Coinbase and Binance.
Utility token transactions, conversely, are “unlikely” to trigger a taxable event for…