30 January 2014

The Inland Revenue Authority of Singapore (IRAS) added new content relating to the income tax treatment of transactions involving virtual currencies to its website on 27 January 2014.

Businesses that choose to accept virtual currencies, such as Bitcoins, for their remuneration or revenue are subject to normal income tax rules in Singapore. Their income derived from or received in Singapore will be taxed. In addition, under Singapore tax laws, tax deductions will be allowed where permissible.

Businesses that buy goods or services using virtual currencies

Businesses that accept virtual currencies as payment for goods or services, or pay for goods or services using virtual currencies, should record the transactions based on the open market value (OMV) of the goods or services in Singapore dollars.

Where the OMV of the goods or services cannot be determined, such as when the good or service is only traded in virtual currencies, the virtual currency exchange rate at the point of the transaction may be used.

Businesses that buy and sell virtual currencies

Businesses that buy and sell virtual currencies in the ordinary course of their business will be taxed on the profit derived from trading in the virtual currency.  Profits derived by businesses which mine and trade virtual currencies in exchange for money are also subject to tax.

However, capital gains from the disposal of these virtual currencies by businesses that buy virtual currencies for long term investment purposes are not subject to tax in Singapore.

Whether gains from disposal of virtual currencies are trading or capital gains depends on the facts and circumstances of each case. When determining if such gains are taxable, factors such as purpose, frequency of transactions, and holding periods are considered.

For more information, please refer to the IRAS website.

Source: Inland Revenue Authority of Singapore