No Tax On Airdrop And Hard forks, Singapore Tax Authority Clarifies. One of the things plaguing the crypto industry is unclear regulations throughout
No Tax On Airdrop And Hard forks, Singapore Tax Authority Clarifies.
One of the things plaguing the crypto industry is unclear regulations throughout the world. Cryptocurrencies came into the spotlight in 2017 after an amazing bull run. This caught the attention of the global regulators. Many countries have come up with their own laws governing the crypto industry. However, the whole space is moving so fast that new things keep coming up. For instance, how should a country deal with tax on airdrops and hard forks?
This has created a lot of headaches for innovators and entrepreneurs. They need regulatory clarity to launch their businesses. Different countries have different laws and that makes it harder. In the mid to long term, things should get easier though. Recently, Singapore’s tax authority, the Inland Revenue Authority of Singapore (IRAS) published a new e-tax guide. It provides a lot of clarity, especially about airdrops and hard forks.
No Tax On Airdrops
If the recipient gets an airdrop for free, they won’t be taxed on it. This is what the IRAS has stated in the tax guide. This should come as a relief to both entrepreneurs as well as users who love free stuff. Airdrops are a great way of attracting a future audience. Since the users don’t have to pay anything, the possibility of scam is really low.
The e-tax guide also filled in a lot of regulatory holes. They have divided cryptos into three categories.
- The first one is a payment token that is used to pay for goods and services.
- The second one is a utility token that represents a right to a good or service.
- The third one is a security token that is treated as digital security. These three types of cryptocurrencies have got new definitions along with how to treat them for tax purposes.
How Is Bitcoin Treated?
Bitcoin is the king of crypto and as such, most people are looking closely at how different countries treat it. The IRAS considers bitcoin as intangible property and not as a legal tender. This makes sense to a lot of people as bitcoin is mainly being used as an investment. For the most part, stablecoins have taken over as payment tokens. But bitcoin can indeed be used for payments even though it is technically a property. The IRAS has addressed that too.
If someone pays in bitcoin for goods and services, that they are essentially engaging in barter trade. Again, this makes perfect sense from a standpoint of bitcoin being property. So, in such a case, the goods and services are taxed but not bitcoin itself. This saves merchants and users the trouble of having to keep track of bitcoin prices at every instance of transactions.
The e-tax guide from the tax authorities goes a long way in providing regulatory clarity. More countries need to do the same. As technology advances, the law needs to keep pace. With something that is as fast as cryptocurrency, lawmakers need to be on their toes.