Crypto tax laws are still in the making and most of the countries don’t have standards in place yet. However, in Singapore, the situation is different. There, The Inland Revenue Authority of Singapore’s (IRAS) regulates the crypto tax.
And on April 17, the IRAS published a new e-tax guide called “Income Tax Treatment of Digital Tokens.”
According to this new tax guidance, each type of the digital token (utility, security, etc.) has a corresponding treatment.
So, let’s find out more about it.
Tax-free airdrops and hard forks
The guide shed some light when it comes to the tax and most common types of digital tokens. For example, tax law treats payment tokens such as bitcoin as intangible property instead of legal tender. Hence, tax on transactions involving payments with tokens such as bitcoin will be applied to purchased services/goods, but not on the token itself.
On the other side, the utility tokens issued during the ICOs are considered as taxable as soon as they deliver the goods, and have to be paid right away.
Besides explaining topics such as tax treatment for security and utility tokens, the guide also clarifies the procedure regarding the airdrops and hard forks.
And there we have some good news. According to the guide, IRAS will not levy income taxes against airdropped tokens, as long the recipient pays zero transaction fees. The same applies to tokens that come from a blockchain hard fork.
Still, the IRAS realizes that the nature of digital token is ever-evolving. Setting up the general income tax treatment would be hard at the moment:
“The general income tax treatment for digital tokens is to be determined based on the nature and use of digital tokens, rather than the label that the tokens take. We recognize that the technology for digital tokens is constantly evolving and the nature of digital tokens may vary over time.”
Final words
Proper tax regulations for crypto tokens are in the making. Singapore is already taking the lead. However, other countries must engage in this topic as well.
The good news for all airdrop enthusiasts is the tax-free approach Singapore took when it comes to airdropped tokens. Now, we can hope that other countries will follow that example.
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