There are many advantages to Lendo having a presence in Singapore, which we have written about before. Now, we are delighted to announce another one that will please many people, and not just the Lendo team: the Singapore government has proposed to exempt specific digital currencies from its Goods and Services Tax (GST).
The report by Cointelegraph says that a partner in PwC Hong Kong’s corporate tax department told the media that this proposed tax cut would help a great number of crytpocurrency-related businesses. The original story was published in the South China Morning Post, and it pointed out that the move would narrow the gap between Singapore and Hong Kong in terms of being tax-friendly jurisdictions for the digital economy.
Gwenda Ho, a partner in PwC Hong Kong’s corporate tax practice said the proposal by the Inland Revenue Authority of Singapore (IRAS) to waive the 7% GST could potentially spur more innovation from entrepreneurs in the field of blockchain-based services and solutions.
Ho also said, “In the past, when Singapore entities issued tokens through an initial coin offering, because the issuers did not want to incur extra compliance costs [through the GST], they would usually exclude Singaporean participants.”
The IRAS also made a statement about its recently issued a draft e-Tax guide explaining the proposed exemption from the 7 per cent tax for digital payment tokens. It coincided with a Ministry of Finance consultation on its draft GST (Amendment) Bill 2019 this month: “The IRAS recognises that taxing cryptocurrencies which function, or are intended to function, as a medium of exchange (digital payment tokens) results in two tax points — once on the purchase of the cryptocurrency and again on its use as payment for goods and services subject to GST.”
The IRAS defines a digital payment token as one that can be expressed as a unit, is “fungible” — replaceable by another identical item — and is not denominated in or pegged to any currency. It cites bitcoin, ethereum, litecoin, dash, monero, ripple and Zcash as examples.
The waiver would level the playing field in terms of taxation between digital payment tokens and conventional money, industry players have said. And it would make Singapore’s sales tax regime similar to other jurisdictions such as Australia, Japan, Switzerland and the European Union.