If you’re a Singaporean and consistently watching the cryptocurrency charts to see when is a good time to buy and sell, it is very important for you to know if you are liable to be taxed on the profits you make when you do such virtual transactions.
The rules in Singapore in regards to taxes has not changed to accommodate specifically to cryptocurrencies, however, there are situations that would make your cryptocurrency profits taxable in Singapore.
1. Virtual Currencies As A Mode Of Payment.
There are a few businesses that are accepting virtual currencies, such as Bitcoins and Ethereum, as a form of payment for the goods and services that they provide. An example would be the DucatusCafe, a cashless cafe in Singapore that accepts payments by cryptocurrencies. This would mean that a business like that would be required to record the sale based on the open market value of the goods or services in Singapore dollars, not in cryptocurrency. If the open market value of the goods or services that would have otherwise been exchanged in Singapore dollars cannot be determined (Eg. the good or service is only traded with virtual currencies) the virtual currency exchange rate at the point of the transaction may be used. [IRAS.gov, 2017]
2. Trading in Virtual Currencies.
There are also businesses that buy and sell cryptocurrencies in their ordinary course of business. This would result in them being taxed on the profit derived from trading in the virtual currencies. Profits derived from businesses which mine and trade cryptocurrencies in exchange for money are also subjected to taxes.
The rules are different if you are looking at keeping cryptocurrencies long-term for investment purposes. Businesses who choose to buy virtual currencies for this purpose may enjoy a capital gain from the disposal of these virtual currencies. However, as there are no capital gains taxes in Singapore, such gains are not subjected to taxes. [IRAS.gov, 2017]
So there is a big difference between trading and holding for investments. It determines whether you are liable to be taxed on the profit or not, and to know if what you are doing is cashing out your investments or cashing out as profits of a trade would boil down to a few factors.
1. Length of ownership
This refers to the holding period of the asset or property in question. The shorter the holding period, the more likely it would be regarded as held for trading.
2. The frequency of transactions.
High frequency of similar transactions is more indicative of trading than an isolated transaction.
3. Circumstances of the realisation.
Some circumstances are less likely to indicate trading (eg. company is forced to sell the property in question due to compulsory acquisition, the sudden urgent need of cash or threat of foreclosure by creditors).
4. Motive.
This refers to whether there was an intention to trade at the time of the acquisition of the asset or property in question.
5. Mode of financing.
This refers to how the purchase of the asset or property in question is being financed. Short-term financing is more indicative of trading than long-term financing. The company’s financial position and ability to hold on to the property will also be taken into consideration.
6. Other factors.
Other factors include whether there were any feasibility studies conducted, the accounting treatment of the company, the availability of documentation or other evidence maintained by the company to indicate its intention. [IRAS.gov, 2017]
Basically, in simple terms, cryptocurrency is treated just like money in Singapore. If it is held on for investment purposes for the long-run, it is not liable for taxes. However, if you are getting it as a form of revenue or profit from trading and other goods and services, it would be liable for taxes — — just like fiat money. With many determining factors drawing the line between investing and trading, make sure you understand all the factors to ensure that you are aware that you are liable for taxation or not.
Now that you know what the taxes are on cryptocurrencies in Singapore, how would you cash out your cryptocurrency?
There are many ways to cash out your cryptocurrency in Singapore.
Coinhako –
This is a local company that sells Bitcoins and Ethereum. They are currently allowing deposits and withdrawals through Xfers into your bank accounts. A simple and easy-to-use interface for users to navigate around.
Coinbase –
This is a US-based company but allows you to use your credit card to buy Bitcoins and Ethereum. They also allow you to use your bank account to withdrawal and deposit via Xfers if you choose not to use your credit card.
Xfers –
This is a local company that allows you to use local bank transfers (FAST) to deposit SGD into an online wallet and then use the funds in the wallet to purchase Bitcoins at Coinhako and Coinbase (after linking them to Xfers)
NuMoney –
The largest Over The Counter (OTC) exchange in Singapore which provides over the counter, face to face selling and buying of cryptocurrencies at their office beside Tai Seng MRT. They are also launching their own online exchange to make their simple process of booking an appointment and buying/selling cryptocurrencies, even easier.
Gemini –
This US-based cryptocurrency exchange was started by the famous Winklevoss brothers. You can use DBS Remit — zero fees, same day transfer — to send USD to your Gemini account.
With the cryptocurrency scene growing in Singapore, it would not be a surprise if more and more regulations are put in place for these virtual currencies. Being part of this digital age, it is important for you to be aware of the things that may affect your cryptocurrencies.
Sources:
https://www.iras.gov.sg/irashome/Businesses/Companies/Working-out-Corporate-Income-Taxes/Specific-topics/Income-Tax-Treatment-of-Virtual-Currencies/
http://www.salary.sg/2017/how-to-buy-bitcoin-in-singapore/
