If you’ve made a fortune in bitcoins over the past year and think you can shield the gain from the tax man, you may be in for a rude shock: Tax authorities around the world have been closely studying the virtual currency, which in some cases is much less anonymous and untraceable than it might seem.
Even if you’re willing to pay your fair share of your bitcoin earnings, prepare for some headaches. Bitcoin’s popularity has run well ahead of tax law, mostly because nobody can seem to decide what exactly bitcoins should be: A currency, like a dollar or a euro? A financial instrument like a stock or a bond? Or illegal altogether?
The Inland Revenue Authority of Singapore (IRAS) thinks it found a workable way to bring bitcoins in from the cold. In a response to the bitcoin brokerage Coin Republic, as reported by Coinbase’s Jon Southurst, IRAS says it will treat bitcoins like a product—no different than an iPhone or an MP3 or a shrink-wrapped piece of software—which incurs taxes when it is sold for cash or used to pay for goods or services:
The IRAS reminded Coin Republic that bitcoins do not fit the definition of ‘money’ or ‘currency’, so supplying them is seen as a good/service for taxation purposes rather than a currency exchange.