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  • SINGAPORE

    Indirect Tax News - February 2020

GST treatment for transactions involving digital payment tokens

Singapore has made changes to the GST treatment of crypto currencies used as digital payment tokens1. In this article we explain the changes.

Treatment prior to 1 January 2020

The supply of virtual currencies (including the exchange for fiat currency or other digital payment tokens and the provision of loans, advances, or credits of digital tokens) is treated as a taxable supply of services.

A person must register for GST in Singapore if the annual turnover of the supply of virtual currencies made in the course of furtherance of a business exceeds SGD 1 million. 

The payment for goods or services using virtual currencies gives rise to a barter trade situation and is regarded as a separate supply of the virtual currencies by the customer in return for the supply of goods or services received. If the supplier of the goods or services is GST-registered, the supplier would have to charge the customer GST on the supply of goods or services (unless the supply is exempt).

Sample illustration below on the assumption that both the customer and supplier are Singapore GST-registered

Changes effective from 1 January 2020

To better reflect the characteristics of digital payment tokens, beginning 1 January 2020 the supplies of digital payment tokens is no longer subject to GST. Specifically:

  1. The use of digital payment tokens as payment for goods or services is disregarded for GST purposes.
  2. A supply of digital payment tokens in exchange for fiat currency or other digital payment tokens, and the provision of loans, advances, or credits of digital tokens are exempt from GST. Therefore, the supply of such tokens, being an exempt supply, do not contribute to the annual taxable turnover for determining the liability for GST registration.

It should be noted, however, that the GST treatment for digital tokens/virtual currencies/cryptocurrencies that do not qualify as digital payment tokens remain unchanged.

With the changes, businesses that trade in digital payment tokens are no longer liable for GST registration even if their annual turnover from the trade exceeds SGD 1 million because the supply of digital payment tokens are exempt supplies (unless the business makes partially, or wholly, exempt supplies and procures services from overseas suppliers exceeding SGD 1 million in a 12-month period, in which case the business may be liable to register for GST by virtue of the reverse charge regime).

Characteristics of a digital payment token

A digital payment token is a digital representation of value that has all of the following characteristics:

  1. It is expressed as a unit;
  2. It is designed to be fungible;
  3. It is not denominated in any currency, and is not pegged by its issuer to any currency;
  4. It can be transferred, stored, or traded electronically; and
  5. It is, or is intended to be, a medium of exchange accepted by the public, without any substantial restrictions on its uses as consideration.

A digital payment token does not include: 

  • Money;
  • Anything which, if supplied, would be an exempt supply under Part I of the Fourth Schedule to the GST Act for a reason other than being a supply of a digital token(s) having the characteristics of (a) to (d) above;
  • Anything that provides an entitlement to receive, or to direct the supply of goods or services, from a specific person or persons and that ceases to function as a medium of exchange after the entitlement has been used.

Who is affected?

Businesses transacting in digital payment tokens are affected by these changes in the GST rules. Examples of digital payment token transactions include, for example:

  1. Buying and selling digital payment tokens;
  2. Using digital payment tokens as payment/consideration;
  3. Making loans of digital payment tokens;
  4. Charging a fee or commission to facilitate the transfer, purchase, or sale of digital payment tokens; or
  5. Issuing digital payment tokens, such as through an Initial Coin Offering (ICO).

Chin Sien Eu
[email protected]

Jackson Cai
[email protected]


[1] A digital payment token refers to any cryptographically-secured digital representation of value that is used or intended to be used as a medium of exchange. Examples of digital payment tokens are Bitcoins, Ether, Litecoin, Dash, Monero, Ripple, and Zcash.