The Inland Revenue Authority of Singapore (IRAS) has spelled out the rules concerning capital gains, earnings and even sales tax on Bitcoin exchanges and Bitcoin related sales.
Singapore has taken a different approach towards the virtual currency compared Norway, the Netherlands and China and so its aim is to issue clear guidance to users on how to handle taxation issues arising from transactions.
The IRAS says, in relation to income tax: "Companies which are in the business of buying and selling Bitcoins will be taxed based on the gains from their sales of the Bitcoins.
"On the other hand, if the Bitcoins are part of the company’s investment portfolio acquired for long term investment purposes, the gains from the sales will be capital in nature and thus not taxable for the company."
Using Bitcoins to buy virtual services will not be subject to tax, but a sales tax on purchases made for physical goods will be levied, as it will on companies in exchange for legitimate currencies. Foreign brokers selling Bitcoins to Singapore-based customers will be excluded from the rules.
According to the authority: "Overall, the general sales tax treatment of Bitcoins will depend on the business arrangement and contractual terms between the parties involved."
The retail giant Overstock.com has boosted Bitcoin legitimacy by choosing to move forwards on plans to accept Bitcoin as payments.
Following Overstock’s opening to Bitcoin on 9 January, about $10,000 worth of Bitcoins had already been spent on the retail site.