As governments the world over make dire warnings about the perils of using bitcoin, Singapore has taken a more relaxed, and profitable, attitude to the virtual currency by issuing clear guidance to users on how to handle taxation issues arising from transactions.
In an e-mail exchange with bitcoin brokering service CoinRepublic
the Inland Revenue Authority of Singapore has spelled out the rules governing capital gains, earnings, and even GST (sales tax) on bitcoin exchanges and bitcoin related sales.
On income tax, the Iras says: "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."
And while using bitcoins to buy virtual services will not be subject to tax, a sales tax on purchases made for physical goods will be levied, as it will on companies that supply bitcoins in exchange for legitimate currencies. The rules will not apply to foreign brokers selling bitcoins to Singapore-based customers.
"Overall, the GST treatment of bitcoins will depend on the business arrangement and contractual terms between the parties involved," states the authority.
Elsewhere in the bitcoin ecosystem, the legitimacy of the coin was given another boost by the decision of opnline retail giant Overstock.com to move forward on plans to accept bitcoin payments. About $10,000 worth of bitcoins had already been spent within hours of Overstock opening its doors to the crypto-currency late on Thursday.
Overstock.com makes more than $1.3 billion per year from sales, making it the largest company to accept Bitcoin to date, although it may soon be outstripped by online electronics giant Newegg, which tweeted yesterday:
Another confidence booster comes Elliptic Vault, a London-based start-up that insures deposits of the digital currency against loss and theft. Underwritten by Lloyd's of London, Elliptic stores user's cryptographic keys on offline servers in a secure location. The company is banking on business from bitcoin holders fearful of losing their horde to online hackers.