The U.S. is increasingly running the risk of being left behind other nations unless its authorities soon address issues surrounding Bitcoin. One of the main problems facing the cryptocurrency is tax treatment. In this regard, Singapore is now taking the lead.
Singapore to Exempt Bitcoin from Goods and Services Tax
Several countries, such as Japan and Switzerland, are already taking action to boost the growth of their crypto industry.
Most recently, the Inland Revenue Authority of Singapore (IRAS), acknowledging the importance and growth of crypto assets, proposed legislation to exempt cryptocurrencies from the Goods and Services Tax (GST), also known as value-added tax (VAT). The IRAS e-Tax Guide (Draft), dated July 5, 2019, highlights,
“Global development and growth in the use of cryptocurrencies have caused tax jurisdictions to review their GST position on cryptocurrencies transactions. Similarly, IRAS has reviewed its GST position to keep up to date with these developments.”
The new tax treatment would take effect on January 1, 2020.
In contrast, U.S. tax authorities seem to be aiming to stifle the nascent crypto industry with stricter controls. As award-winning writer Adriana Hamacher reports, “The U.S. Internal Revenue Service (IRS) proposes electronic surveillance to weed out Bitcoin tax evasion.”
The IRS to Update its Bitcoin-related Guidance
A few members of the U.S. Congress are becoming increasingly aware that the U.S. is falling behind other countries in the crypto industry. As a result, some of them are now considering bills aiming to clarify legal questions surrounding cryptocurrencies and thus stimulate the development of this new industry.
Presently, the U.S. IRS considers Bitcoin and all other all cryptocurrencies as property for U.S. federal tax purposes. Buying Bitcoin is not a taxable transaction.
However, paying with Bitcoin to buy something else is considered a sale of Bitcoin, such as the sale of a property. Consequently, it is a taxable event. The IRS notice IR-2018-71, issued on March 23, 2018, states,
“Virtual currency transactions are taxable by law, just like transactions in any other property.”
This tax treatment might soon change. Some policymakers are pressuring the IRS to update its 2014 guidance on cryptocurrencies, which according to the Wall Street Journal, could happen within weeks.
Taxes and the imposition of stringent regulations certainly disincentivize any budding industry. Thus, cryptocurrency enthusiasts are hopeful that the forthcoming IRS guidance update will consider adequate tax incentives to stimulate the growth of the American crypto industry.
Do you think Singapore’s proposal to exempt Bitcoin from the GST, and the forthcoming IRS guidance update will impact Bitcoin’s value? Let us know in the comments below!
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