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Singapore Clarifies GST On Bitcoin Transactions

by Mary Swire, Tax-News.com, Hong Kong

10 January 2014


The Inland Revenue Authority of Singapore (IRAS) has issued guidance on the GST treatment of goods and services acquired in exchange for the virtual currency bitcoin and bitcoin trading.

In an email sent to Singapore-based bitcoin broker Coin Republic, IRAS clarified that, "the sale (including the exchange) of bitcoins in return for a consideration in money or in kind is a taxable supply of services subject to GST. As bitcoin does not fall within the definition of "money" or "currency" under the GST Act, a supply of bitcoins is not a supply of money and would not be disregarded for GST purposes. The supply of bitcoins would be treated as a supply of services as it involves the granting of the interest in or right over the bitcoins. If the seller is a GST-registered person, he would have to account for output tax on the sale of bitcoins made in the course or furtherance of his business."

"Where bitcoins are accepted as payment for real goods or services (for instance for digitized items like online music,) such transactions are treated as a barter exchange and GST should be accounted if the parties involved are GST-registered persons. However, if the bitcoins are used to exchange for virtual goods or services within the virtual gaming world, as a concession, the supply of bitcoins will not be taxed until the bitcoins are exchanged for real monies, goods or services."

"The GST treatment of the supply of bitcoins will depend on whether the company is acting as an agent or principal in the transaction: If the company merely facilitates and is acting as an agent in the bitcoin trade, GST is chargeable only on the commission fees received. However, if the company is acting as a principal in the bitcoin trade (e.g. buys and onward sells bitcoins to the customer) GST is chargeable on the full amount received, on both the sale of bitcoins and commission fees."

"Under section 13(4) of the GST Act, a supply of services shall be treated as made in another country if the supplier belongs in that other country. In this case, if the company belongs outside Singapore (i.e. there is no business or fixed establishment in Singapore,) the supply of bitcoins shall be treated as made outside Singapore. Accordingly, GST is not chargeable on the supply of services (bitcoins) made outside Singapore."

Coin Republic founder David Moskowitz welcomed the confirmation, stating: "The guidance which IRAS laid out is rational and well thought out. As a business owner I can clearly account for my earnings on Bitcoin trades for my clients and my own positions and pay the proper taxes."

TAGS: compliance | VAT tax authority guidance | tax | business | value added tax (VAT) | interest | Singapore | fees | tax authority | currency | trade | services | VAT goods & services classification | VAT compliance matters

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