Singapore’s Inland Revenue Authority Says it Won’t Collect Taxes on Cryptocurrency Airdrops or Hard Forks

Singapore’s tax authority, the Inland Revenue Authority of Singapore (IRAS), confirmed that it will not be collecting taxes on airdropped cryptocurrency, provided that the recipients get them  for free.

As noted in an income tax treatment guide, released on April 17, 2020, the IRAS clarified that it classifies digital tokens into three main categories.

These include payment tokens, which are primarily used to pay for products and services; utility tokens, which may represent a right to use a particular set of goods and services; and security tokens, or digital securities, which may be subject to the same set of laws that are applicable to traditional securities.

The tax authority provided updated definitions and corresponding tax treatment for the major types of crypto tokens.

The tax guidance from IRAS serves as an official guide for local consumers and crypto-related firms. It’s also meant as a reference for initial coin offering (ICO), initial exchange offerings (IEOs), and security token offering (STO) issuers. The guide mainly describes a fragmented approach for a nascent cryptocurrency and blockchain sector.

The tax guide confirms that the IRAS will not impose income taxes against airdropped digital  payment tokens or cryptocurrencies obtained from a blockchain hard fork (backwards incompatible upgrade of a digital currency platform).

In a manner that’s similar to digital payment tokens, non-traditionally delivered cryptos (like via airdrops) will still trigger taxable events on transactions, meaning when holders actually spend their tokens.

IRAS’ guide clarifies that payment tokens like Bitcoin are “intangible property,” and are not considered legal tender. If anyone pays for goods or services in BTC, then they are taking part in a “barter trade” for which items that are being sold will be taxed, and not the actual payment token.

At present, the IRAS has not developed a “methodology to value payment tokens.”

The agency said that it requires taxpayers to self-determine a “reasonable and verifiable” exchange rate that may be quoted by large digital asset exchanges such as Binance or Coinbase.

Transactions made with utility tokens are “unlikely” to trigger taxable events, the IRAS said. Instead, the use of utility tokens might be a deductible event under the current guidelines.

Security tokens will be subject to tax laws that are applied to traditional securities.

Notably, Singapore does not tax capital gains on securities. The country only requests small amounts of taxes on dividends, which may depend on the issuer.

Security tokens earnings and transactions are taxed only when they’re considered a “revenue asset.”

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