As each day that passes on, more and more countries will start to tax cryptocurrencies. Nature and use of digital assets will be at the forefront what is taxable income. As most, it will be determine by capital gains and intention of purpose. Some it will be the new normal and others it will be a financial arrangement.
Singapore is the latest country to announce a tax on income derived from NFT transactions. On March 11, Singaporean Finance Minister Lawrence Wong said the tax will apply to those who earn an income from transacting or trading NFTs. Furthermore, the minister stated that as Singapore does not have a capital gains tax regime, the country will not tax capital gains from NFTs.
According to The Business Times, Wong said the tax treatment “will be determined based on the nature and use of the NFT”. As a matter of fact, Singapore lawmakers had earlier warned its citizens regarding NFTs and the metaverse. However, conversely, last month, Singapore’s central bank said it will not regulate the NFT market.
Singapore taxes NFTs: All you need to know
First of all, Singapore will tax any individuals earning via NFT trading. But, it won’t tax the profits of individuals who earn capital gains from NFT transactions. In order to determine whether an individual is trading in NFTs or earning income from NFT transactions, the Inland Revenue Authority of Singapore has laid out some parameters.
These include the nature of the asset, intention of purchase, holding period, and frequency and volume of similar transactions. The authority will also take into consideration any financial arrangements to keep the asset for a long period, and reasons for its disposal.
To be sure, Singapore is considered a tax haven as it has some of the lowest income tax rates in Asia. To illustrate, the country’s highest tax is 22% for high-income individuals. On the other hand, Indonesia charges a maximum of 45%, and the Philippines charges 35%.
In addition, Singapore has one of the most flexible cryptocurrency regulations in the world. While cryptocurrencies are not recognized as legal currency, investors can use them in many aspects of regulated trading. What’s more, the Monetary Authority of Singapore has strict rules to protect cryptocurrency investors.
Several other countries tax NFTs
Early last month, India announced a 30% tax on income from the transfer of any digital asset, including cryptocurrencies and NFTs. Announcing the tax, finance minister Nirmala Sitharaman stated that the country will impose a 1% tax deduction at source (TDS). Furthermore, recipients must pay tax on any digital asset they receive as gifts.
Similarly, late last year, South Korea announced its plans to tax NFTs in the country. As per the new rules, there is a 20% tax rate on NFTs worth 50 to 300 million won. For NFTs worth over 300 million won, the proposed tax is 25%.
Last year, the Australian Tax Office office as well issued a mandate to report NFT and crypto gains. Currently, individuals have to pay taxes on the revenue generated from trading NFTs. In addition, they have to pay taxes on profits from NFTs. In the US, the Internal Revenue Service treats cryptocurrency as property to levy tax. Citizens should also report capital gains or losses when converting crypto to fiat.