Singapore’s tax rules will be applied to transactions of non-fungible tokens, or NFTs, said Finance Minister Lawrence Wong in Parliament on Friday, as reported by The Business Times.
This tax will be determined based on the nature and use of the NFT, Wong said. He added that the tax would apply to people who derive income from NFT transactions, including those who trade NFTs.
Capital gains on NFTs, however, will not be taxed. Singapore lacks a capital gains tax, which is levied on profits from the sale of assets, such as stocks or property.
Over the last several years, the city-state has been a hotbed for cryptocurrency and blockchain startups. Singapore’s permissive regulatory climate has made it a hospitable place for such businesses, especially after the Chinese government’s crackdown on crypto in 2017.
Several exchanges, including Huobi, have moved their headquarters to Singapore in light of this crackdown.
However, in recent months, Singaporean authorities have taken a more cautious stance towards crypto and NFTs even as these digital assets found greater popularity. In January, the Monetary Authority of Singapore (MAS) issued a warning about the risks associated with investing in digital assets.
The MAS has also said that it will continue to engage with industry players to understand the risks and benefits of new technologies.
According to Josephine Teo, Singapore’s minister for communications and information, the country’s government is “closely examining” crypto, blockchain, decentralized finance (DeFi), and NFTs, amid the rise in cryptoscams. As such, authorities have been careful in giving the green light to crypto exchanges and digital payments businesses.
Binance Asia Service, a subsidiary of crypto exchange Binance in Singapore, withdrew its application for a cryptocurrency exchange license in late 2021. Two months later, in February, it finally ceased all operations in the city-state.
Nikkei Asia also reported in December that of 170 Singaporean businesses that had applied to the Monetary Authority of Singapore (MAS) for a digital payment token license, more than 100 were denied or withdrawn.