Basic Research on Singapore's Encryption Tax System and Regulatory Framework (I)

Written by: Carlton, FinTax

1. Introduction

As a global important international financial center, Singapore has long attracted global capital and innovative forces with its open market environment, sound legal system, and efficient regulatory framework. In recent years, with the rapid development of digital assets and blockchain technology, this city-state has gradually become an important hub for crypto assets in the Asia-Pacific region. It not only gathers a large number of startups and international trading platforms but also attracts institutional investors, technology developers, and policymakers to explore the future of digital finance. Driven by diversified market demand and proactive policy support, Singapore’s crypto ecosystem is gradually maturing.

According to the Independent Reserve Cryptocurrency Index ( IRCI ) Singapore 2025 report, Singapore’s awareness of cryptocurrency has reached a historical high, with 94% of respondents being aware of at least one crypto asset, and 29% having owned crypto assets. Among them, 68% of crypto investors hold Bitcoin, and 46% have ever held or are currently holding stablecoins, with the usage of stablecoins for actual payments and cross-border transfers reaching 53%. Additionally, 57% of crypto asset holders believe the crypto industry will achieve mainstream status in the future, and 58% of the public is calling for clearer government regulations… These data points collectively depict a market that is widely recognized, diversely applied, and has clear expectations for regulation.

In this context, understanding Singapore’s cryptocurrency tax system and regulatory framework is not only a legal compliance necessity but also key to gaining insights into market development potential and risk landscape. This study will revolve around two main lines: the fundamental tax system and regulatory framework, presenting the interaction between institutions and markets in Singapore’s crypto ecosystem, aiming to clearly depict the current state of the crypto industry in Singapore for investors, in order to provide a reliable basis for business decisions.

2. Regulatory Framework

Cryptocurrency often appears alongside terms like risk many times. Unlike most jurisdictions, where there are unique regulatory provisions for cryptocurrencies among different states in the U.S., Singapore’s cryptocurrency regulatory framework is known for its clarity and balance. Although obtaining relevant qualifications and licenses in Singapore is not easy for many Web3 companies, it is precisely because of this that the risks for local Web3 enterprises in Singapore are significantly controlled.

In Singapore, the taxation and financial regulation of crypto assets are handled separately by the Inland Revenue Authority of Singapore (IRAS) and the Monetary Authority of Singapore (MAS).

The tax administration of cryptocurrencies is primarily the responsibility of IRAS. As the national tax authority, IRAS formulates and implements policies regarding income tax and Goods and Services Tax (GST) related to crypto assets, covering the tax obligations of both businesses and individuals in various activities such as holding, trading, paying, and issuing. IRAS has released multiple specialized e-Tax Guides addressing the income tax treatment of digital tokens and the GST treatment of digital payment tokens, clarifying the tax classifications, taxable events, and tax principles for different types of tokens (payment, utility, and security). Additionally, IRAS is leading the implementation of the Crypto Asset Reporting Framework (CARF) in the country, playing a core role in cross-border tax information exchange.

The Monetary Authority of Singapore (MAS) primarily exercises financial regulatory authority over cryptocurrencies. It not only fulfills the functions of a central bank but also acts as a comprehensive regulatory body for the financial industry and payment services, significantly influencing the licensing, compliance, and risk control of businesses related to crypto assets. For instance, MAS’s licensing requirements for digital payment token service providers (DPTSP) and its regulatory framework for stablecoins will indirectly affect the tax treatment and compliance pathways of related businesses.

3. Basic Research on Cryptocurrency Taxation in Singapore

Singapore’s tax system is known for its simplicity and concentrated tax base. Its most notable feature is the absence of capital gains tax globally, and it has abolished estate and gift taxes. This means that in Singapore, the appreciation of asset value itself typically does not constitute an independent taxable event; whether tax is levied depends on the nature and frequency of the transaction. Coupled with relatively low income tax rates, its tax regime maintains a high level of inclusivity for capital flows and innovative activities while ensuring stable fiscal revenue.

Under this regulatory framework, Singapore’s taxation of crypto assets is relatively focused, primarily on income tax and goods and services tax. The former emphasizes taxation on income from regular or commercial crypto transactions, while the latter regulates the indirect tax treatment of digital payment tokens in the exchange of goods and services. Other taxes, such as withholding tax and employment income tax, are only triggered in specific transaction structures or payment scenarios.

(1) Income Tax

Singapore’s income tax system adopts the territorial source principle, meaning that only income sourced from Singapore and income remitted to Singapore from overseas are taxed. Personal income tax is implemented on a progressive tax rate system, with resident rates ranging from 0% to 22% (up to a maximum of 24% starting from the 2024 tax year), while non-residents are typically taxed at a fixed rate of 15% or the resident tax rate, whichever is higher. The corporate income tax has a unified rate of 17% and offers tax exemptions for startups and reductions for specific industries.

On April 17, 2020, IRAS issued the Income Tax Treatment of Digital Tokens, aimed at providing guidance on the income tax treatment of transactions involving digital tokens.

This guide categorizes digital tokens into three types: payment tokens, utility tokens, and security tokens.

The guide involves the following five types of transactions:

i. Receive digital tokens as payment for goods and services;

ii. Received digital tokens as employment compensation;

iii. Using digital tokens as payment for goods and services;

iv. Buy and sell digital tokens; or

v. Issue digital tokens through Initial Coin Offering (ICO).

1. Tax Treatment of Payment Tokens

Synonymous with cryptocurrency, with no other functions besides payment.

Although payment tokens are a means of payment, they are not qualified as legal tender because they are not issued by the government. For tax purposes, the IRAS considers payment tokens as intangible assets, which typically represent a set of rights and obligations. Transactions involving goods or services using payment tokens are regarded as barter trades, and the value of the goods or services being transferred should be determined at the time of the transaction.

Table 1: Classification and Tax Treatment of Payment Tokens under Income Tax

Table 2: Tax Treatment Under Different Disposal Methods

2. Tax Treatment of Utility Tokens

Functional tokens grant token holders explicit or implied rights to use or benefit from specific goods or services, and the tokens can be used to exchange for these goods or services.

Its forms are diverse, such as: similar to vouchers (granting the holder the right to obtain services from the ICO company in the future), or keys (granting the holder access to the ICO company’s platform). When someone (hereinafter referred to as “user”) obtains functional tokens to redeem goods or services in the future, the expenditure incurred by the user to purchase the functional tokens will be regarded as a prepayment. According to tax deduction rules, deductions can be enjoyed based on the amount of expenditure incurred when the tokens are used to redeem goods or services.

The tax treatment of functional tokens issued during the ICO period will be explained in Section Four of the tax treatment of ICOs.

3. Tax Treatment of Security Tokens

Security tokens grant token holders partial ownership or rights to an underlying asset and typically come with explicit or implicit control or economic rights. The more common types of issued security tokens are recorded in the form of debt or equity. However, since security tokens are essentially a tokenized form of traditional securities, they may also take the form of other securities or investment assets/tools, such as units in a Collective Investment Scheme. The nature of security tokens depends on the rights and obligations associated with them, which will further determine the nature of the returns that holders can obtain, which may be interest, dividends, or other distributions, and are subject to corresponding taxation by the holders.

When a holder disposes of a security token, the tax treatment of the gains/losses from the disposal depends on whether the security token is considered a capital asset or an income-generating asset for the holder. Accordingly, the gains/losses will be treated as either capital income or business income.

Security tokens are subject to relatively lenient policies in Singapore, similar to other securities, and will not be taxed as capital assets. Depending on the issuer of the security tokens, taxes may be imposed on dividends and other income that fall under the category of income-generating assets.

4. Tax Treatment of ICOs

ICO, or Initial Coin Offering, involves the issuance of a new token, which is typically issued in exchange for other payment tokens or, in some cases, for fiat currency. ICOs are commonly used by token issuers to raise funds or to provide a means to access existing or future specific goods or services.

The taxability of the funds raised through an ICO in the hands of the token issuer depends on the rights and functions attached to the tokens issued to investors:

Whether the funds obtained from the issuance of payment tokens should be taxed depends on the specific facts and circumstances.

Funds raised from the issuance of functional tokens are typically regarded as deferred revenue;

The funds obtained from the issuance of security tokens are similar to the funds obtained from the issuance of securities or other investment assets/tools, and their nature is capital income, therefore they are not subject to taxation.

For securities-type tokens that pay interest, dividends, or other distributions, such payments related to the issuer’s deductibility should be executed in accordance with the provisions of Articles 14 and 15 of the Income Tax Law.

See Table 3.

In addition, the following special circumstances may be encountered:

ICO Failure: If a company issues functional tokens through an ICO and uses the raised funds for developing a platform or service, but ultimately fails to deliver, the tax treatment will depend on the destination of the funds: if the raised funds are refunded to investors, the company is not required to pay tax on the refunded amount; if the funds are not refunded, it is necessary to determine based on the nature of the ICO whether it is a capital transaction or a revenue transaction. The tax authorities will comprehensively consider factors such as the company’s main business, the reasons for issuing tokens, and contractual obligations.

Preliminary Expenses: Reasonable business expenses incurred by the company during the ICO prior to formal operation can be declared according to the current preliminary expense deduction rules. According to Article 14U of the Income Tax Law, eligible expenses can be deducted in the base period before the business starts, and any unused losses can be carried forward to future years or utilized through Group Relief. This provision helps to alleviate the tax burden on businesses in the startup phase.

Founder Tokens: ICO companies can reserve a portion of tokens to grant to founding developers in recognition of their contributions to the design and implementation of the tokens. If these “Founder Tokens” are issued as service compensation, they are considered taxable income and are taxed when the founders actually gain control; if there is a lock-in period or restriction period, they will be taxed based on their value at the end of the period; if they are obtained not as a result of providing services, they will not be treated as taxable income.

Notice: The Inland Revenue Authority of Singapore (IRAS) explicitly requires taxpayers to properly maintain complete transaction records related to digital tokens and provide them when necessary. These records should include the transaction date, the quantity of tokens received or sold, the token value and exchange rate at the time of the transaction, the purpose of the transaction, customer or supplier information (applicable to buying and selling transactions), ICO details, and receipts or invoices for business expenses, among others. This information is not only the basis for tax declaration but also an important proof for responding to tax audits and ensuring compliance.

Table 3: Taxation of Different Types of Token ICOs

(2) GST Goods and Services Tax

Goods and Services Tax (GST) is the main form of indirect tax implemented in Singapore since 1994, broadly classified as a Consumption Tax, as it is a tax levied on final consumption. It is essentially a Value Added Tax (VAT) that is charged at a uniform rate on the supply of most goods and services as well as on imported goods. As of 2024, the standard GST rate is 9%. GST is collected and remitted by businesses and applies to domestic transactions and cross-border digital services, with certain financial services, exports, and specific international services eligible for exemptions or zero rates.

On August 3, 2022, IRAS released a new version of GST: Digital Payment Tokens (initially published on November 19, 2019), which stipulates the handling of consumption tax for transactions involving digital tokens and cryptocurrencies (hereinafter referred to as digital payment tokens).

The core change is that, starting from January 1, 2020, the supply of eligible Digital Payment Tokens (DPT) is exempt from GST to avoid double taxation in the two stages of token purchase and use. This adjustment significantly reduces tax friction for cryptocurrencies in payments and transactions, enhancing Singapore’s competitiveness as a crypto asset-friendly jurisdiction. However, it is important to note that this exemption is limited to situations that meet the DPT definition and does not affect the normal collection of related taxable items such as intermediary service fees and platform fees.

In the specific rules, the IRAS first strictly defines DPT and clarifies the categories of tokens that are not exempt from taxation (such as utility tokens, security tokens, closed virtual currencies, etc.). Subsequently, the guidelines distinguish between different types of tokens and their GST treatment in business processes such as trading, exchanging, and payment. For example, the buying, selling, exchanging, and payment activities of compliant DPTs can enjoy tax exemption, but related services provided by platform operations, wallet custody, payment intermediaries, etc., still need to be calculated as taxable supplies under GST. Through this dual judgment of “asset attributes + business types,” Singapore maximizes the reduction of tax barriers for crypto transactions while maintaining the fairness of the tax system.

1. Dividing digital payment tokens

The guidelines stipulate that digital payment tokens (DPT) are a form of digital representation of value that possesses all of the following characteristics:

(a) is expressed in unit form;

(b) is designed to have interchangeability (homogenization);

© is not priced in any currency and the issuer does not peg it to any currency;

(d) can be transferred, stored, or traded electronically;

(e) is, or aims to become, a medium of exchange accepted by the public or a part of the public, and there are no significant restrictions when used as consideration.

However, digital payment tokens do not include the following situations:

(f) legal tender;

(g) If a supply can be regarded as exempt under Schedule 1 of the Goods and Services Tax Act (Part I of Fourth Schedule), and the reason for this is not that the supply itself possesses the characteristics of digital payment tokens from (a) to (e), then that supply does not fall under digital payment tokens;

(h) Any rights granted to specific individuals or groups to provide goods or services, and that are no longer used as a medium of exchange after that right is exercised.

IRAS lists typical DPTs, including Bitcoin, Ether, Litecoin, Dash, Monero, Ripple, and Zcash, all of which possess core features such as fungibility, not being pegged to any fiat currency, electronic transferability, and being a publicly recognized medium of exchange. Furthermore, tokens like IdealCoin, which can be used for payments within a specific smart contract framework and freely outside of that framework, as well as StoreX, which can continue to circulate as a means of payment even after exercising certain specific rights, also meet the definition of DPT.

In contrast, situations that do not belong to DPT include: stablecoins, which do not meet the requirements of fungibility and non-anchoring because their value is pegged to fiat currency; virtual collectibles such as CryptoKitties, which do not possess homogeneity due to their non-fungibility; game points or virtual currencies that are limited to use within specific environments; and points or loyalty points issued by retailers or platforms that can only be redeemed for specific goods or services. These tokens cannot serve as a broad medium of exchange accessible to the public.

There are also some cases that initially appear similar to DPT, but will be excluded under specific conditions. For example, the StoreY token was initially designed as the sole means of payment for purchasing distributed file storage services, but after users exercise that specific right, the token no longer serves as a medium of exchange, thus no longer meeting the definition of DPT.

For more detailed rules, features, and case explanations, please refer to Section 5 of this guide (especially paragraphs 5.2–5.13 and the examples).

2. General Trading Rules for Digital Payment Tokens

When DPT is used as a means of payment for goods or services (excluding exchange for fiat currency or other DPT), the payment itself is not considered a supply and therefore is not subject to GST. The payer is not required to pay GST when using DPT for payment, but if the payee is registered for GST, they must calculate output tax on the goods or services provided, unless the supply is exempt, zero-rated, or outside the scope of taxation. For example, GST-registered company A purchases software with Bitcoin; A does not need to pay GST on the transferred Bitcoin, but seller company B, if registered for GST, must calculate GST on the software supply.

Secondly, the exchange between DPT and fiat currency, as well as the exchange between one DPT and another DPT, are considered exempt supplies and are not subject to GST. However, businesses must still declare the relevant transactions as exempt supplies when reporting and must report the net realized gains or losses. For example, Company C exchanges Bitcoin for Ethereum, and neither party is required to pay GST; they only need to treat it as an exempt supply in their statements.

In addition, if a GST-registered company issues DPT through an Initial Coin Offering (ICO) and exchanges it for fiat currency, the income from the issuance is also considered a tax-exempt supply and should be reported as tax-exempt income in the GST return. For example, Company E issues DPT and sells it to the public for Singapore Dollars, with the income from the new currency reported as tax-exempt supply income.

Finally, the loans, advances, or credit arrangements of DPT also fall under exempt supplies, and the related interest income is not subject to GST, but must be reported as exempt income in the declaration. For example, if Company F lends DPT and receives interest, that interest is listed as exempt supply in the GST declaration.

Table 4 explains the specific rules for determining the supply amount, supply time, and the location of customers involved in transactions with digital payment tokens.

Table 4: Determination of Various Accounting Subjects

3. Specific Business Scenario Rules

(1) Mining

In the general mining process, miners provide computing power or verification services for the blockchain network, but they have no direct relationship with the parties involved in the transactions being serviced, and the party issuing the block rewards/miner fees cannot be identified. Therefore, obtaining digital payment tokens generated from mining (such as block rewards) does not constitute a “supply” in the sense of GST, and there is no need to impose GST on this acquisition.

However, if miners provide paid services to identifiable counterparts (for example, charging commissions, transaction fees, computing power rental fees, etc. as agreed), it constitutes a taxable supply of services. If the miner is a GST registered person, they should be taxed at the standard rate and declare accordingly; zero-rate treatment can only be applied if the conditions for zero-rate are met. If it is impossible to reasonably determine the location of the trading counterpart, it should be treated at the standard rate.

Regarding the subsequent disposal of mined tokens: As of January 1, 2020, miners selling or transferring mined digital payment tokens to customers based in Singapore are exempt from tax; if miners use the mined tokens to purchase goods or services, it is not considered as “supplying tokens” and there is no tax liability on the token portion (the goods/services supplier will still be taxed according to their regulations).

(2) Intermediary

The services related to digital payment tokens provided by intermediaries, even if they involve token trading, still fall under taxable supplies. Whether an intermediary registered for GST needs to report the sales of tokens in their GST return depends on whether they act as a “principal” or as an “agent” in the transaction. If selling tokens as a principal, they must report the sale as their own supply for GST; if selling tokens on behalf of a client as an agent, the sale should not be included in their own supply, but only the fees or margins collected in the transaction should be included in the supply and reported for GST (unless the supply is eligible for a zero rate). In determining their own identity, intermediaries should self-assess based on indicators such as contractual responsibilities and risk assumptions, payment obligations, pricing authority, and token ownership.

(3) Rules for Input Tax Credit and Reverse Charge Treatment

In the course of business operations, enterprises can only apply for input tax deductions for expenditures used for taxable supplies; if the expenditure is used for exempt supplies (such as exchanging digital payment tokens for legal currency or other tokens), it cannot be deducted. If the expenditure involves both taxable and exempt supplies, or relates to the overall operation of the enterprise, it needs to be allocated according to proportion. For enterprises that simultaneously conduct taxable and exempt supplies (such as some businesses involving the exchange of digital payment tokens), input tax should be allocated and attributed like that of other partially exempt enterprises, unless the De Minimis Rule is satisfied, in which case digital payment token supplies may be treated as ancillary exempt supplies if they meet the relevant conditions. Lastly, as partially exempt enterprises, if they obtain services or low-value goods from foreign suppliers, they may still be subject to reverse charge obligations and should refer to the relevant guidelines from the Inland Revenue Authority of Singapore.

4. Frequently Asked Questions

Table 5: Common Q&A

(3) Classified by usage activities

Table 6: Taxable Situations for Daily Use Activities

(4) Other taxes

Globally, most countries generally define cryptocurrencies as non-legal tender, so the main taxes associated with them usually include income tax, value-added tax, or consumption tax. In the previous sections, we have summarized in detail the main tax treatment rules for cryptocurrencies in Singapore regarding daily holding and usage activities in the income tax and goods and services tax (GST) sections. In contrast, the relevance of other taxes to the daily application of cryptocurrencies is relatively low, and no further introduction will be provided.