Finance Minister Of Singapore Confirms – Income Tax Applies To NFTs
The Finance Minister of Singapore, Lawrence Wong, said that the current income tax rules apply to NFTs transactions. However, capital gains on NFTs will not be taxed.
Singapore’s income tax treatment will be determined based on the nature and use of the NFT.
Wong addressed the parliament and revealed that the prevailing income tax rules will apply to the income derived from non-fungible token (NFT) transactions or trading in it. However, as there is no capital tax regime in Singapore, individuals deriving capital gains from the NFT transactions will not be taxable, he clarified.
Singapore’s stance on NFTs
Earlier this year, Singapore officials cautioned the citizens in terms of decisions related to digital investment vehicles, especially in NFT and metaverse spaces. While Singapore is sometimes referred to as the crypto hub in Asia, it urged global regulators to exercise greater control over digital investments, and is closely exploring the risks associated with technologies such as blockchain, decentralized finance, NFTs, and the metaverse.
Last month, Singapore’s central bank said it will not regulate the NFT market. Tharman Shanmugaratnam, Senior Minister and Minister in charge of Monetary Authority of Singapore (MAS) said:
“MAS does not and cannot possibly regulate all things or products that people choose to invest their money in. We consider the substance of an asset when assessing whether a product or activity should come under MAS’ regulatory remit. MAS does not currently regulate NFTs given the nature of their underlying assets, such as the few examples earlier. This is also the stance taken by most other leading jurisdictions.”
According to Shanmugaratnam the MAS has opted for a “tech-neutral stance” and added that it “looks through” to the underlying features of the token to decide if it is to be regulated by the MAS. An NFT will be subjected to MAS’ regulatory requirements if it has the characteristics of a capital markets product under the Securities and Futures Act (SFA).
Singapore’s Taxation
Singapore has some of the lowest income tax rates in Asia. The highest tax is at 22% for high-income individuals. Especially the zero capital gains tax makes the city-state an attractive haven for many high-value individuals, despite its 2022 budget proposing to raise taxes for high earners.
The MAS also has stringent regulations to safeguard cryptocurrency investors.
Startups in Singapore have the option benefit from a tax exemption of up to $125,000 on their first $200,000 of earnings for the first three years of business.
Companies must be incorporated in Singapore and have no more than 20 shareholders to qualify for the startup tax break.
