Authorities will allow tax-free crypto mining if they determine that the action is only performed in a non-profit manner.

In new update of the tax guide in Singapore, the authorities revealed new considerations on some cryptocurrencies and mining tokens. Besides, the country established a classification system among the tokens used in different activities, such as payments, tokens issued by Initial Coin Offerings (ICOs), among others.

The Singapore Internal Revenue Authority (IRAS) was in charge of the guide and recently launched it. This guide covers the emissions and fluctuations of tokens in the hands of miners and companies. In this way, the guide will classify who should or should not pay taxes, according to his financial movements and the type of activity he is executing.

Companies Will Continue Paying Taxes When Using Tokens

Since the laws in Singapore do not contemplate the use of cryptocurrencies, representatives of the Singaporean authorities indicate that the tokens should not be considered as currency of circulation in the country, even if the users record the transactions they conducted using these digital assets.

Therefore, the authorities will not consider as “commercial exchange” any financial operation conducted by a company in the country with tokens of a different nature, which entails the payment of taxes.

This means that both the sale and the purchase of goods and services with digital currencies or tokens will mean tax obligations to the treasury. For this reason, miners must report to the authority the purchases and sales they execute regularly.

A statement accompanied the new update of the guide. This document says that “it is unlikely to create a taxable income”, this referring to the payment with tokens. Besides, the statement emphasizes that these tokens can “result in a deductible expense subject to the usual deduction rules”.

The Treatment of ICO

The authorities in Singapore will treat this type of digital currency as capital or income assets. The decision will depend on the reason for the shipment of these funds.

For this reason, Singapore considers the rewards that the founder obtains for the issue of an ICO as capital assets. But if the user issues this reward for services rendered, these digital assets will be considered as income.

Facilities for Amateur Miners

The guide details that Singapore will have a “light” deal with crypto miners. This consideration is possible since the collection of taxes will depend on the intentions of the miner.

“Miners may perform mining as a hobby or to hold the tokens mined as a long-term investment. If so, the disposal gains/ losses of the payment tokens are not taxable/ deductible. On the other hand, gains/ losses from the disposal of payment tokens by a miner assessed to be trading in nature would be taxable/ deductible”.

However, this measure has certain limitations, since, if it is possible to determine that the miner conducts the activity consistently and during very long periods, Singaporean authorities can consider that the motive of the miner is profit.

In this way, the authorities will determine if the miner is engaged in the mining process as a commercial income activity. Commercial mining in Singapore carries the payment of taxes on their profits.

By María Rodríguez


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