DRC Founder Selina Lin was invited to attend the 2018 The Future of Token Economy Summit held by SUSS on November 30 in Singapore. At a separate interview held at the side of the Summit, Selina, Ms Zann Kwan, CEO of Bitcoin Exchange,explored the significance of a proper accounting and tax planning for startups in the token economy era.
1Cryptocurrency Startups Lack Tax Awareness
“We have raised X million. How do we treat this on our accounting book?” This is what Zann has encountered over the past few years.
A lot of startups used to focus on building their products and raising funds; however, almost completely ignored accounting and taxes. For example, a company raised funds through an ICO unaware that the funds are subject to income tax and the GST according to Singapore tax regulation and, like many startups, had not registered with the GST yet.
A company that has business that stretches around the globe must be aware of all local tax regulations. For example, Korean companies that operates in Singapore should be aware certain income might be subject to both foreign and Singapore taxes. Even within one country there might be a double taxation issue. For example, in Singapore when you buy and redeem cryptocurrency, you need to pay the GST twice.
In addition, Singapore has decreed that a non-profit entity is required to submit audited financial reports as well.
All the above issues are things startups need to pay attention to. Furthermore, it is important to seek professional consultation in terms of accounting and taxes before any offerings to create a better tax plan and more efficient tax structure. For example, if you receive a token, even if it has no market value, you still are obligated to pay tax. In this case, it is better to receive it in January rather than December, giving you an entire year to work on the taxation part. Therefore,Zann suggests crypto companies share their complete business plans with their professional service providers up front for better tax planning because more awareness and preparation can save your company a lot of money.
2Token Economy Needs Clearer Tax Guidance
Currently most cryptocurrency companies are following existing regulations tailor-made for other industries. Even if Singapore, one of the top crypto hubs, has very friendly regulations, clear clarifications or examples of accounting and tax guidance for crypto assets are few and far in between. Accounting and taxes should be an enabler for whatever business models or products rather than an obstacle, but it seems the trend as more regulations are decreed.
The token economy is desperately in need of clearer tax guidance from the industry, including International Accounting Standards, and any government that wants to be an international cryptocurrency hub.
3Distributed Collaboration Platform Enables Easy Access to Professional and Inclusive Services
The rapid growth of the token economy poses challenges to traditional accounting and tax consultancy services, considering that current service providers are in short supply in terms of both relative industry experience and clear guidance, and SMEs have a difficult time getting professional services.
The DRC Distributed Professional Service Platform is dedicated to tackling the above pain points that exist within the token economy. DRC has been inviting professional service providers to the ecosystem meanwhile trying to build a service qualification rating framework to facilitate inclusive professional services and to help startups to grow in both a healthy and compliant way.
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