Singapore recently issued new legislation that will rid cryptocurrency users of sales tax should assets be used to purchase goods and services.
Singapore Is Leading the Way to Further Crypto Acceptance
Cryptocurrencies were originally designed to be used in place of fiat currency, checks and credit cards. They were built to make purchases, but their volatility and price swings have often gotten in the way. Thus, many countries have either outright banned the usage of crypto or businesses have stepped in to say, “No! We won’t accept crypto as a means of payment.”
Maneuvers like this one in Singapore is likely to lead to further usage and really get crypto’s popularity pumping.
Per the accounting firm PwC, the decision to exempt all crypto-based transactions from sales tax is likely to “benefit cryptocurrency exchanges, asset managers and blockchain entrepreneurs.” At press time, Singapore charges a seven percent tax whenever an item is sold or purchased by a consumer. However, the country has been working towards more crypto-friendly regulations to entice future blockchain businesses and related digital asset firms to make Singapore their new home.
In addition, legislators within the nation have long studied the rules of Hong Kong, which has sought to separate itself from the rest of China in terms of cryptocurrency and blockchain innovation.
The country’s tax authority – known as IRAS – recently issued a draft guide discussing how cryptocurrencies can and should be regulated within Singapore. The guide states:
The IRAS recognizes 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) are subject to GST.
This latest decision is designed to, in basic terms, give cryptocurrency users and acceptors a break of sorts. Right now, crypto transactions are prone to double taxation for both the users and the receivers and ridding all future sales tax would potentially “level the playing field,” according to financial authorities. Other regions implementing similar rules include Japan, Australia and the European Union.
Could ICOs Return?
Furthermore, the guide appears to implement new rules for initial coin offerings (ICOs). Granted all tokens issued or sold through ICOs fall within “digital payment token” guidelines, they too will not be subject to the seven percent sales tax. These tokens should be designed to be less speculative and more ready for everyday purchases.
This could potentially mark a return to ICOs in Asia, which have largely vanished over the past year. At one point, ICOs were among the most popular means of garnering funding for startups, but they have largely gone out of fashion due to intense regulation throughout the continent and the growing number of phony fundraising opportunities that have left investors in the negative.