28 January 2014

New content relating to the goods and services tax (GST) treatment of transactions involving virtual currencies was added to the Inland Revenue Authority of Singapore (IRAS) website on 23 January 2014.

For GST purposes, virtual currencies, such as Bitcoins, are not considered as ‘money’, ‘currency’ or goods’. Instead, the supply of virtual currencies is treated as a supply of services, which does not qualify for GST exemption.

Businesses that buy goods or services using virtual currencies

When a business buys goods or services using virtual currencies, the transaction will be considered as a barter trade. In a barter trade, 2 supplies are made – 1 by the supplier who supplies the goods and services, and another by the business who pays the supplier using virtual currencies.  GST will need to be charged on each supply if the respective supplier is GST-registered.  However, if the supplier of the goods and services belongs outside Singapore, the business who pays the supplier using virtual currencies need not charge GST as the supply will be zero-rated.

As a concession, if a business uses virtual currencies to buy virtual goods or services within the gaming world, it need not charge GST until they are exchanged for real monies, goods or services.

Businesses that sell virtual currencies

If a business is GST-registered and sells virtual currencies as a principal, it will have to charge GST on the sale of the virtual currencies, unless the sale is made to a person belonging outside Singapore.

If a business acts as an agent for another party when selling the virtual currencies, it will need to charge GST on the commission fees that it receives, unless the service is supplied to a person belonging outside Singapore.

If a virtual currency exchange located in Singapore is GST-registered, it will need to charge GST on the trading fees that it charges.

Businesses that import goods paid for using virtual currencies

Goods imported and paid for using virtual currencies are subject to the same import GST rules and reliefs as those paid for using real currencies.

For more information, please refer to the IRAS website.

Source: Inland Revenue Authority of Singapore