The Singapore Tax Authority (IRAS) will not tax airdrops or hard forks under the new crypto guidance as long as the recipient gets it for free.
20 April, 2020 | AtoZ Markets – IRAS released its new electronic tax guide to regulate the crypto industry. This new guide establishes specific regulations for three different types of cryptocurrencies:
- Payment tokens, used for goods and services.
- Utility tokens.
- Security tokens or digital values.
New Guidelines Exempting Hard Forks and Airdrops
According to the guide, cryptocurrencies from hard forks and airdrops will not be subject to any tax. This new guide, aimed at consumers and businesses as well as ICO issuers, describes how the sector should be regulated. Besides, it also defines a series of guidelines for other procedures such as hard forks and airdrops.
The tax guide also clarified the procedures for other obscure crypto events. For example, IRAS will not levy a tax on airdropped payment tokens or blockchain hard fork, which is a “windfall “. Like other payment tokens, nontraditionally delivered cryptos will nevertheless be taxable on transactions.
The IRAS guide considers payment tokens such as bitcoins as “intangible goods” and not as legal tender. If a consumer pays in bitcoin, he engages in a “barter trade” for which the goods and services are taxed, and not the payment token itself. The same is true for businesses that can likely assess the tax burden on their assets based on government-issued measures of money.
However, when it comes to determining the tax burden of a good or service whose value is initially represented in cryptocurrencies. A contractor who agrees to do work for 3 BTCs cannot calculate the tax because IRAS does not have a “methodology for evaluating payment tokens”. Thus, IRAS said that taxpayers must determine a “reasonable and verifiable” rate from popular services such as Coinbase and Binance.
Utility token transactions are “unlikely” to trigger a taxable event for the user, whose acquisition of these tokens as a right to future services. It will treat as an advance payment. The utility tokens will be a deductible event according to the guide.
Singapore Levies No Capital Gain Tax on Securities
Security tokens operate according to the same loose tax laws as those which apply to other securities in Asia. Singapore does not levy capital gains tax on securities of any kind. Taxes dividends sparingly are depending on the issuer, leaving security tokens taxable only when they are classified as “income assets”.
“A review of the facts of the case may be required” for payment token ICOs, the guide said.
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