What Are Singapore’s Crypto Tax Rules?

Singapore’s tax framework for digital payment tokens, the official term for cryptocurrencies, is based on the nature of the transaction and the parties involved. The Inland Revenue Authority of Singapore (IRAS) guidelines state that for both individuals and companies, the primary consideration is whether cryptocurrency activities constitute a business or are for personal investment. This distinction determines the resulting tax obligations. The country’s approach has made it a significant location for cryptocurrency activities.

Determining Tax Liability for Individuals

Singapore does not have a capital gains tax. This means that if an individual’s cryptocurrency transactions are considered personal investments, any profits from selling them are not taxed. The appreciation of assets held for long-term investment purposes is viewed as a capital gain and falls outside the scope of income taxation.

The IRAS distinguishes between a personal investment and a professional trading business using criteria known as the “badges of trade.” These are not rigid rules but are factors used to assess the nature of the transactions and include:

• Frequency of transactions: A high volume of buying and selling suggests a commercial endeavor.
• Holding period: Short-term holdings often indicate trading, while long-term holdings point toward investment.
• Motive: An intention to make a quick profit from market fluctuations is more likely to be seen as trading.
• Level of organization: Dedicating significant time and resources to crypto activities may indicate a business.

If an individual is deemed to be operating a business based on these factors, their profits are subject to personal income tax rates, which range from 0% to 24% for residents.

Tax Treatment of Specific Crypto Activities

Trading

The tax treatment of cryptocurrency trading hinges on the “badges of trade” analysis. Individuals who engage in frequent and systematic trading will likely have their profits classified as taxable income. If a person’s activities resemble that of a professional trader, the gains are reported as business income.

Staking and Yield Farming

Rewards from staking and yield farming are treated as income at the moment they are received. The value of these rewards, calculated in Singapore Dollars (SGD) at the time of receipt, is subject to income tax. This treatment is because staking is viewed as an activity that generates returns, similar to earning interest.

Mining

Income from cryptocurrency mining is also considered taxable. The rewards received from validating transactions are seen as payment for services rendered. The value of the mined coins, at the time they are acquired, constitutes taxable income.

Airdrops and Hard Forks

Cryptocurrencies received from airdrops or hard forks are not taxable upon receipt. This is because they are not received as part of a business activity or in exchange for any service and are viewed as a windfall. An exception occurs if the airdrop is part of a promotional campaign for a business or if the recipient has performed a service to receive the tokens.

Non-Fungible Tokens (NFTs)

The tax treatment of NFTs follows the same principles as other digital assets. For individuals who create and sell NFTs as a business, the profits are considered taxable income. Conversely, if an individual purchases NFTs for their personal collection, any gain from a future sale is considered a capital gain and is not subject to tax.

Taxation for Singaporean Businesses

For companies in Singapore whose main business is cryptocurrency trading, all profits are treated as business income. These gains are subject to the prevailing corporate income tax rate of 17%.

When a business accepts cryptocurrency as payment for goods or services, this is treated as a barter transaction. The value of the goods or services sold is the amount of revenue that must be reported for tax purposes. This value is determined in Singapore Dollars at the time of the transaction.

Regarding the Goods and Services Tax (GST), the supply of digital payment tokens is considered an exempt supply, meaning GST is not charged on the token itself. Using these tokens to pay for goods or services is also not subject to GST. However, GST at a rate of 9% is applicable to the fees charged by exchanges for facilitating crypto transactions.

Required Records for Tax Compliance

Maintaining detailed and accurate records is a requirement for tax compliance in Singapore. For every transaction that could have tax implications, specific information must be documented to substantiate any income reported to the IRAS.

The records to maintain for each transaction include:

• The date and type of transaction, such as a purchase, sale, or receipt of staking rewards.
• The value of the cryptocurrency in Singapore Dollars at the time of the transaction.
• The purpose of the transaction, to help determine if it was for investment or business.
• Details of the other party involved, such as wallet addresses or exchange records.

These records provide a comprehensive audit trail that supports the figures reported on a tax return. All documents should be retained for the statutory period to comply with IRAS requirements.

How to Report Crypto Income

Once a taxpayer has determined their crypto activities result in taxable income, they must report it to the IRAS. The process differs for individuals and businesses, and it is important to use the correct forms.

Individual taxpayers who have generated profits from crypto trading must declare this income on their annual income tax return, Form B1. The profits should be reported under the “other income” section, which is for income that does not fall into standard categories like employment or rent. The e-filing deadline for this form is April 18th.

For businesses, income from cryptocurrency activities should be included in their corporate income tax return, Form C-S or Form C. This income is combined with all other business revenue. The net profit, after deducting allowable expenses, is then subject to the corporate tax rate.