Multinational professional services firm and one of the ‘Big Four’ auditors, PwC, has praised Singapore’s move to exempt cryptocurrencies and digital tokens from sales tax when used to pay for goods and services.
On July 5, the Inland Revenue Authority of Singapore (IRAS) published a draft document proposing the exemption of all entities operating with “Digital Payment Tokens” from incurring goods and service tax (GST) liabilities. The draft recommends passing the exemption into law from Jan 1, 2020.
Singapore Tax Authority to Waive 7% tax on Cryptocurrency Payments
However, the draft noted that payments made in the form of stablecoins will not be eligible for the exemption, stating:
Any digital token that is denominated in any fiat currency or with a value pegged to any fiat currency will not qualify as a digital payment token.
PwC predicts that waiving of Singapore’s 7% goods and services tax will place the city-state as one of the world’s most tax-friendly jurisdictions for virtual currencies, and foster innovation within blockchain-based service industries.
Gwenda Ho, a partner in PwC Hong Kong’s corporate tax practice, listed cryptocurrencies, blockchain entrepreneurs, and asset managers among the beneficiaries of the policy move. Ho predicts that the tax waivers will make Singapore more competitive with Hong Kong as a virtual currency hub. She stated:
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 subject to GST.
Mrs, Ho also attributed Singapore’s common exclusion from initial coin offerings (ICOs) to the GST regime, stating:
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.
Singaporean Food Court Franchise Accepts Cryptocurrency Payments
At the start of July, Singaporean food court franchise, Kopitiam, announced that it will roll out 20 self-service kiosks linked to an electronic payment system that accepts cryptocurrencies across locations in Singapore. The self-service kiosks, dubbed ‘KOPItech’, accept payments in the form of bitcoin, ethereum, and creatanium, among other digital payment methods.
Kopitiam’s chief executive officer, Alden Tan, indicated that the kiosks cost approximately SGD 500,000 (approximately $365,000) to develop, adding: “Allowing cryptocurrencies will help us to learn more about this segment of the payment system.”