According to a partner in the corporate tax practice of PwC Hong Kong, the plans to exempt certain digital currencies from GST i.e Goods and Services Tax by Singapore would benefit businesses related to cryptocurrency in the country.
As reported in the South China Morning’s Post on July 29 – an English language newspaper of Hong Kong, Gwenda Ho argued that the step taken by the Government of Singapore to drop the 7% GST for cryptocurrencies when using them to pay for goods and services will have a positive impact on cryptocurrency exchanges, blockchain entrepreneurs and asset managers.
Per Ho, the sales tax regime of Singapore will also be put on an equal footing with other jurisdictions like Hong Kong, Japan, Australia, European Union, and Switzerland after the adoption of the proposed law. He stated that as long as the features of a digital payment token is there in a toke as defined by the rules, such proceeds from initial coin offerings could also be exempted from GST. He continued:
“While this proposal would improve Singapore’s competitiveness in its GST treatment on cryptocurrencies, Hong Kong in comparison is completely free of any sales tax so there is one less tax issue to be concerned about for cryptocurrency industry participants.”
However, the Inland Revenue Authority of Singapore had initially considered the exemption in July. If accepted the proposed exemption, is set to take effect on January 1, 2020, and will overhaul the supply of digital payment tokens in the current system where it is treated as a taxable supply of services. The draft document sets out the two proposed core changes to taxation rules:
“The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens, and (ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.”
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