Singapore: A Crypto-Friendly Country for Digital Nomads
Singapore is one of the most crypto-friendly countries, thanks to its thriving crypto environment and favorable regulation. The government’s clear approach has also reassured crypto-averse investors. According to Coincub’s Global Crypto Ranking 2021 (Q4), Singapore is the most crypto-friendly country.
When it comes to cryptocurrencies, the Singapore government adopts a realistic, practical, and targeted approach. The government recognizes the economic and social potential of cryptocurrency and seeks to foster a favorable regulatory environment for its adoption within Singapore’s financial landscape. But it also exercises cautions to identify the risks involved, such as in terms of consumer protection and anti-money laundering, and then managing these risks in a proportionate manner.
According to a survey done by Independent Reserve in 2021, 43 percent of Singaporeans own a cryptocurrency.
Crypto Taxes in Singapore
Bitcoin, Ethereum, and other decentralized cryptocurrencies are classified as Digital Payment Tokens by the Inland Revenue Authority of Singapore (IRAS).
The taxation of cryptocurrencies in Singapore varies depending on the type of activity. The profit made through Bitcoin trading in the regular course of business would be liable to income tax. Capital gains obtained from the purchase of cryptocurrencies for long-term investment reasons are not subject to taxation in Singapore because capital gains are not taxed.
So put simply, if you buy Bitcoin or another cryptocurrency and sell it with profit, you don’t have to pay tax. But if you trade on a regular basis, you’ll be taxed.
Before engaging in any cryptocurrency-related activities in Singapore, you should seek legal advice from a law firm to see if your activities would be governed under Singapore legislation.
Crypto Mining Tax in Singapore
According to the “Income Tax Treatment of Digital Tokens” guide published by IRAS, the taxability of a miner’s gains from the sale of payment tokens is determined by whether the miner does so with the aim of profiting. Miners may do so as a hobby or as a long-term investment in the coins they mine. If this is the case, the payment tokens’ disposal gains/losses are not taxable or deductible. Gains/losses from the sale of payment tokens by a miner deemed to be trading in nature, on the other hand, would be taxable/deductible.
Companies are treated differently because they are normally set up for profit, therefore a company engaged in mining activities will be considered to be carrying on mining business, and general tax regulations will apply. It will be able to deduct its mining expenses on an “incurred” basis from the day it started doing business. This is the date on which the company developed a profit-making structure and began its first commercial operation. The following are signs that a mining operation has begun:
- Purchase of mining equipment
- The sale of digital tokens that have been mined
Is Cryptocurrency Legal in Singapore?
In Singapore, it is legal to own and trade cryptocurrencies. However, cryptocurrencies, also known as ‘virtual assets,’ are not legal tender.
Businesses that trade cryptocurrencies follow strict KYC (Know-Your-Customer) and AML (Anti-Money Laundering) procedures.
Singapore's central bank, the Monetary Authority of Singapore (MAS), hasn’t produced or supported any cryptocurrencies for retail use. It has, however, worked with industry partners to execute a joint effort, such as Singapore's "Project Ubin," to investigate the application of blockchain and distributed ledger technology for payment and securities clearing and settlement.
Popular Cryptocurrency Exchanges in Singapore
Thanks to its thriving crypto environment, there are many crypto exchanges in Singapore.
Here’s a list of the most popular ones:
- Huobi Global
- Independent Reserve
More on Cryptocurrency Tax Regulations in Singapore
See below to have a general understanding of tax treatment for tokens in Singapore.
Tax Treatment for the Payment Tokens
A payment token is considered intangible property. As a result, transactions employing payment tokens as payment for products or services are considered barter trade, and the value of the items or services transferred should be decided at the time of transaction.
As a result, if a company receives payment tokens for goods or services it has given, the company will be taxed on the value of the underlying goods or services. When a firm utilizes payment tokens to pay for goods and services, however, a deduction for the goods purchased or services received is permitted, subject to general deduction limitations. The amount of the deduction will be determined by the cost of the underlying goods or services.
In some cases, the value of a payment token may need to be established for tax purposes. When you agree to execute services in exchange for a set amount of payment tokens, you must declare your income depending on the value of the payment tokens received.
IRAS does not currently have a system for valuing payment tokens. If you meet certain conditions, as a taxpayer you can select an exchange rate that best reflects the value of the tokens received.
Tax Treatment for the Utility Tokens
The use of a utility token to exchange for goods or services is unlikely to generate income that is subject to taxation at the time of exchange. It may, on the other hand, result in a deductible expense if the usual deduction procedures are followed.
Tax Treatment for the Security Tokens
The taxability of a security token return is determined by the type of return, such as whether it is in the form of interest, dividends, or other distributions.
What Else You Need To Know
There you have it. We’ve tried to give you an overview of the crypto scene in Singapore. Note that this information is based on what the current laws and regulations state. Before you start any crypto activity in Singapore, make sure you speak to a tax lawyer to avoid any problems.
Before you leave, you might also want to check out our guide on Crypto Portugal, another crypto-friendly country who is highly popular among digital nomads.
Frequently Asked Questions
Is crypto taxable in Singapore?
Selling your crypto assets with profit doesn't lead to taxation. However, if you do it as professional trading activity, you'll be taxed.
What is the tax for crypto mining in Singapore?
If you’re doing it as a hobby, you may not be taxed. However, there are rules and laws for companies that do it on a professional level.