By Natalie Lord
Under the Bill, cryptocurrencies will not be considered legal tender; however, they will be considered as an acceptable medium of exchange for certain types of transactions. The legislation will exempt the supply of digital payment tokens that are used in exchange for fiat currency from the GST. Furthermore, loans of digital payment tokens will also be exempt from the GST.
The amendment will not affect owners of digital currencies or those holding virtual currencies as assets. For those who are trading digital currencies the sole tax that will be imposed will be done so upon the supply of goods and services but not on the tokens themselves. The advantage of this structure is that is helps make the tax process for owners of digital currencies easy and prevents them from having to worry about tax implications.
Singapore has used the GST system since 1986 to regulate income tax and corporation tax. It was first introduced as a single rate in 1994 at a rate of 1%. That rate has increased through the years and is expected to rise to 7% in 2021 and 9% four years after that. Owners or users of digital tokens will not be required to pay these taxes, which enables the potential for greater upside for investors.
While Singapore is at the forefront of changes that will benefit cryptocurrency enthusiasts, Swiss regulators are facing calls to amend their policies to prevent an exodus of cryptocurrency projects from the country after two banks of just a handful that had been welcoming of cryptocurrencies, closed their doors on it last year. The move has seen businesses looking from Switzerland to offshore rivals like the Cayman Islands, Gibraltar, Liechtenstein and now possibly Singapore too.
Crypto-related business in Switzerland is negligible compared to its traditional banking sector, but has nonetheless grown rapidly and employs hundreds of people. Zug had been hailed as “Crypto Valley” with between 200 and 300 virtual currency entities opening there in previous years.
In terms of ranking, Switzerland dropped from second place in 2017 to sixth place this year in an evaluation of the sum of ICO funds raised, according to a study published by PwC and the Crypto Valley Association in June. Topping the list were the Cayman Islands and the British Virgin Islands; but it’s highly probable that Singapore could prove stellar competition in the future.
With its sights focused on creating a successful environment for digital currencies and a strategy that is keeping it on par or ahead of the competition, it’s no wonder then that cryptocurrency heavies like Binance, The Litecoin Foundation and Kryptos-X have chosen Singapore as their base.