A Basic Study on the Cryptocurrency Tax System and Regulatory Framework in Singapore (I)

Author: FinTax Carlton

1. Introduction

As a key global international financial center, Singapore has long attracted global capital and innovation with its open market environment, sound legal framework, and efficient regulatory structure. 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, the awareness of cryptocurrency in Singapore has reached an all-time high, with 94% of respondents familiar with at least one crypto asset, 29% having owned crypto assets, among which 68% of crypto investors hold Bitcoin, and 46% have ever held or are currently holding stablecoins. The usage rate of stablecoins for actual payments and cross-border transfers has reached 53%. Furthermore, 57% of crypto asset holders believe that the crypto industry will achieve mainstream status in the future, and 58% of the public are calling for further clarity on government regulation... These data collectively depict a market that is widely aware, diverse in application, 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 a key to insight into market development potential and risk patterns. This study will focus on two main lines: the basic tax system and regulatory framework, presenting the interaction between institutions and the market in Singapore's crypto ecosystem, to clearly depict the current state of Singapore's crypto industry for investors, aiming to provide reliable support for business decision-making.

2. Regulatory Framework

Cryptocurrencies often come with terms such as risk appearing together. Unlike most jurisdictions, which have unique regulatory provisions for cryptocurrencies among the various states in the United States, Singapore's cryptocurrency regulatory framework is known for its clarity and balance. Although obtaining the 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 businesses in Singapore are significantly controlled.

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

The tax administration of cryptocurrencies is mainly handled by IRAS. As the national tax authority, IRAS formulates and implements policies related to income tax and Goods and Services Tax (GST) involving crypto assets, covering tax obligations for businesses and individuals in various activities such as holding, trading, paying, and issuing. IRAS has released several specialized e-Tax Guides that specifically address the income tax treatment of digital tokens and the GST treatment of digital payment tokens, clarifying the tax classifications, taxable events, and taxation principles for different types of tokens (payment tokens, utility tokens, security tokens). At the same time, IRAS is also leading the implementation of the Crypto Asset Reporting Framework (CARF) in the country, playing a core role in cross-border tax information exchange.

MAS primarily implements financial regulatory authority over cryptocurrencies, serving not only as a central bank but also as a comprehensive regulatory body for the financial industry and payment services. It has a significant impact on the licensing, compliance, and risk control of businesses related to crypto assets. For instance, the licensing requirements imposed by MAS on digital payment token service providers (DPTSP) and the regulatory framework for stablecoins will indirectly influence the tax treatment and compliance pathways for related businesses.

III. Fundamental Research on Singapore's Cryptocurrency Tax System

Singapore's tax system is known for its simplicity and concentrated tax base, with its most prominent feature being the absence of capital gains tax globally, as well as the abolition of estate and gift taxes. This means that in Singapore, the appreciation of asset value itself typically does not constitute an independent taxable event; whether taxes are imposed depends on the nature and frequency of the transaction. Additionally, with relatively low income tax rates, Singapore's tax system maintains a high level of inclusivity for capital flow and innovative activities while ensuring stable fiscal revenue.

Under this institutional framework, Singapore's taxation scope for crypto assets is relatively focused, primarily on income tax and goods and services tax. The former emphasizes the taxation of income derived from regular or commercial nature crypto transactions, while the latter regulates the indirect tax treatment of digital payment tokens in the trading 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 a territorial source principle, meaning that only income originating from Singapore and income remitted to Singapore from overseas are taxed. Personal income tax is implemented on a progressive tax rate system, with resident tax rates ranging from 0% to 22% (up to 24% for the 2024 tax year), while non-residents are generally taxed at a fixed rate of 15% or the resident tax rate, whichever is higher. The corporate income tax rate is a flat 17%, and it provides 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 covers the following five types of transactions:

i. Receiving 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 the Initial Coin Offering ( ICO ).

1. Tax Treatment of Payment Tokens

Synonymous with cryptocurrency, having no other function besides payment.

Although payment tokens are a method of payment, they are not issued by the government and do not qualify as legal tender. For tax purposes, the IRAS considers payment tokens to be 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.

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

Table 2: Tax Treatment Under Different Disposal Methods

2. Tax Treatment of Functional Tokens

Functional tokens grant token holders explicit or implicit rights to use or benefit from specific goods or services, and the tokens can be used to exchange 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 the right to access the ICO company 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, when tokens are used to redeem goods or services, deductions can be enjoyed based on the amount of expenditure incurred.

The tax treatment of functional tokens issued during the ICO period will be explained in Section 4 of the ICO tax treatment.

3. Tax Treatment of Security Tokens

Security tokens grant token holders a partial ownership or rights to an underlying asset, and typically come with explicit or implied control or economic rights. The more common types of issued security tokens are recorded in the form of debt or equity. However, because security tokens are essentially a tokenized version of traditional securities, they may also take other forms of securities or investment assets/instruments, 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 receive, which may include interest, dividends, or other distributions, and must be taxed accordingly by the holders.

When holders dispose of security tokens, the tax treatment of their disposal gains/losses 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 or business income.

Security tokens are subject to relatively relaxed policies like other securities in Singapore, and there will be no taxation on security tokens that are considered capital assets. Depending on the issuer of the security tokens, taxation may be applied to income derived from assets such as dividends that belong to the category of income assets.

4. Tax Treatment of ICOs

ICO stands for Initial Coin Offering, which involves the issuance of a new token, typically issued in exchange for other payment tokens, or in some cases, for fiat currency. ICOs are often used by token issuers to raise funds or to provide a means for access to 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 issuing payment tokens are taxable depends on the specific facts and circumstances;
• Funds raised from the issuance of functional tokens are usually 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/instruments, and their nature is capital income, therefore they are not taxable.

For security tokens that pay interest, dividends, or other distributions, the deductibility of such payments by the issuer should be executed in accordance with the provisions of Articles 14 and 15 of the Income Tax Law.

See Table 3.

In addition, there may be the following special circumstances:

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

Pre-operational expenses: Reasonable business expenses incurred by the company during the ICO prior to formal operation can be declared in accordance with the current rules for deducting pre-operational expenses. According to Article 14U of the Income Tax Law, eligible expenses can be deducted during the baseline period before the business starts, and unused losses can be carried forward to future years or utilized through Group Relief. This provision helps to alleviate the tax burden on enterprises in the startup phase.

Founder Tokens: ICO companies can reserve a portion of tokens to grant to founding developers as recognition for their contributions in the design and implementation of the tokens. Such "Founder Tokens" issued as service compensation are considered taxable income and are taxed when the founders actually gain control; if there is a lock-up period or restriction period, they are taxed at their value at the end of that period; if obtained not as compensation for services, they are not treated as taxable income.

Note: The Inland Revenue Authority of Singapore (IRAS) clearly 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 (for buying and selling transactions), ICO details, and receipts or invoices for business expenses, among others. This information is not only the basis for tax declarations but also an important proof for dealing with tax audits and ensuring compliance.

Table 3: Tax Situations of Different Types of Token ICOs

(2) GST Goods and Services Tax

Goods and Services Tax (GST) is a major form of indirect tax implemented in Singapore since 1994. Broadly speaking, it falls under the category of Consumption Tax, as it is a tax levied on final consumption. It is essentially a type of 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. Certain financial services, exports, and specific international services may qualify for tax-exempt or zero-rate treatment.

On August 3, 2022, IRAS released a new version of GST: Digital Payment Tokens (initially compiled 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 from January 1, 2020, the supply of qualifying Digital Payment Tokens (DPT) is exempt from GST to avoid double taxation during both the purchase and use of the tokens. 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 taxable items such as relevant intermediary service fees and platform fees.

In the specific rules, the IRAS first strictly defined the concept of DPT and clarified the categories of tokens that do not fall under the tax exemption scope (such as utility tokens, security tokens, closed virtual currencies, etc.). Subsequently, the guidelines differentiated 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 custodians, and payment intermediaries still need to be calculated according to GST taxable supplies. Through this dual judgment of "asset attributes + business types," Singapore maximized the reduction of tax obstacles for crypto transactions while maintaining fairness in the tax system.

1. Classification of 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) expressed in unit form;

(b) has interchangeability (homogeneity) in design;

(c) 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 itself, or intends to become, a medium of exchange accepted by the public or a portion 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 is regarded as exempt under Part I of Fourth Schedule of the Goods and Services Tax Act, and the reason is not that the supply itself is a digital payment token possessing the characteristics from (a) to (e), then that supply does not fall under digital payment tokens;

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

The IRAS lists typical DPTs, including Bitcoin, Ether, Litecoin, Dash, Monero, Ripple, and Zcash, all of which have core features such as fungibility, not being pegged to any fiat currency, being electronically transferable, and being recognized as a medium of exchange by the public. Additionally, tokens like IdealCoin, which can be used for payments within a specific smart contract framework and freely outside of the framework, as well as tokens like 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 currencies; virtual collectibles like CryptoKitties, which do not possess homogeneous characteristics due to being non-fungible; game points or virtual currencies that are limited to use within specific environments; and points or loyalty tokens issued by retailers or platforms that can only be exchanged for specific goods or services. These tokens cannot serve as a widely accepted medium of exchange for the public.

There are also some situations that may initially appear similar to DPT, but will be excluded under specific conditions. For example, the StoreY token was originally 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 and thus no longer meets 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 examples).

2. General Trading Rules for Digital Payment Tokens

When DPT is used as a means of payment for goods or services (but not including conversion into fiat currency or other DPT), the payment itself is not considered a supply and thus is not subject to GST. The payer is not required to pay GST when using DPT, 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 using Bitcoin, A does not need to pay GST on the outgoing Bitcoin, but if seller company B is a GST registrant, they 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 both considered exempt supplies and do not require the payment of GST. However, businesses must still declare the relevant transactions as exempt supplies when reporting and 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 reports.

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

Finally, 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 an exempt supply in the GST declaration.

Table 4 explains the specific rules on how to determine the supply amount, supply time, and the location of the customer in transactions involving digital payment tokens.

Table 4: Determination of Various Accounting Subjects

3. Specific Business Scenario Rules

(1) Mining

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

However, if miners provide paid services to identifiable counterparties (such as collecting commissions, transaction fees, computing power rental fees, etc. as agreed), it is considered a taxable service supply. If the miner is a GST registrant, they should be taxed and reported at the standard tax rate; zero tax rate treatment is only applicable when the zero rate conditions are met. If it is not possible to reasonably determine the location of the counterparty, it should be treated at the standard tax rate.

Regarding the subsequent disposal of mined tokens: From January 1, 2020, if miners sell or transfer the digital payment tokens they have mined to customers based in Singapore, it is considered a tax-exempt supply; if miners use the mined tokens to purchase goods or services, it is not regarded as a "supply of tokens" and there is no tax on the token portion (the supplier of goods/services is still taxed according to their own regulations).

(2) Intermediary

Services related to digital payment tokens provided by intermediaries, even if involving token trading, remain subject to taxable supply. Whether an intermediary registered for GST needs to report token sales in their GST return depends on whether they act as a "principal" or 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 clients as an agent, they should not include the sales amount in their own supply but only account for the fees or margin received in the transaction as supply and report 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 bearing, payment obligations, price determination rights, and token ownership.

(3) Rules for Input Tax Deduction and Reverse Charge Processing

In the process of operation, enterprises can only apply for input tax deduction for expenditures used for taxable supplies; if the expenditure is used for exempt supplies (such as exchanging digital payment tokens for legal tender or other tokens), it cannot be deducted. If the expenditure involves both taxable and exempt supplies, or pertains to the overall operation of the enterprise, it needs to be allocated proportionally. For enterprises simultaneously engaging in taxable and exempt supplies (such as parts of the business involving the exchange of digital payment tokens), input tax should be allocated and attributed similar to other partially exempt enterprises, unless the de minimis rule is satisfied, in which case digital payment token supplies may be considered as partially exempt supplies if the relevant conditions are met. Finally, as partially exempt enterprises, if services or low-value goods are obtained 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) Divided by usage activities

Table 6: Classification of 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 section, we have summarized in detail the main tax treatment rules for cryptocurrencies in daily holding and usage activities in Singapore, focusing on income tax and goods and services tax (GST). In contrast, the relevance of other taxes to the daily application of cryptocurrencies is relatively low and will not be further elaborated.