Taxing NFTs has been a subject of debate in many countries for months. The U.K., South Korea, and Singapore have different perspectives of taxing NFTs. Although Singapore has repeatedly stated that it won’t tax capital gains on NFTs, charging income tax on the digital asset class won’t be exempted.
On Friday, Singaporean Minister of Finance Lawrence Wong stated that the recent income tax rules apply to NFT transactions. However, the minister clarified that the nature of the transaction determines if the tax rule would apply or not.
Taxing Income From NFT Transactions
In Singapore, the new tax rule stipulates that any individual trading NFTs as a source of income will be mandated to pay taxes on such income. However, the country explicitly stated that it wouldn’t tax capital gains on NFTs. At least, not yet.
Contrary to Singapore, South Korea has no intention of taxing income from NFT trading. Last year, FM Hong Nam-ki assured NFT traders that the country wouldn’t tax their income. However, he did say there would be tax on cryptocurrency transactions, which came to effect on January 1.
Countries like Australia and the United States enforced taxation on capital gains. Unlike the former, The U.S. levies income tax on NFT and digital currency trading.
Singapore’s income tax rate is amongst the lowest in the Asian region, with a maximum rate of 22%. Compared to Indonesia and the Philippines, the maximum tax rate is 45% and 35% each. For this reason, the country decided to focus on raising income in its 2022 budget by taxing high earners.
Singapore: The New Crypto Refuge
The country has arguably the most accommodative crypto laws globally. Even with the income tax on transactions involving NFTs, the lack of a tax rule on capital gains makes it a safety net for many high-profile crypto individuals.
Unlike El Salvador, virtual currency isn’t a legal tender, but Singaporean laws permit the trading of digital currencies and for the exchange of goods and services. However, they are highly regulated as MAS ensures that crypto investors are utterly safeguarded.
The flexible crypto rules aren’t the only thing that makes Singapore a household name in crypto. The clampdown initiated by China last year pushed several firms operating there to Singapore. After Huobi was axed from China, it picked Singapore as a location for its regional operations.
Alongside the accommodating crypto laws, the rise in the number of exchanges also accelerated the adoption rate. Statista reveals that approximately 15.8% of Singaporeans own crypto, slightly above the global average of 15.5%.
Given the growth of digital currency in the country in the last year, experts expect it to grow further as a currency of trade and a store of value. However, there are no chances of it replacing fiat, according to DBS CEO Piyush Gupta.
