What the ruling examined
Summary 2/2022 asked whether security tokens were equity comparable to trust units, whether payments were trust distributions, and whether Singapore tax or withholding tax applied to distributions from exempt income or gains. The trust was an unregistered business trust established in Singapore, with Singapore company Z as trustee.
The token represented a Class 1 unit
The issued capital comprised ordinary units and Class 1 units issued as tokens listed on a trading platform. Each token represented one Class 1 unit, equivalent to X ordinary units. It therefore conveyed X votes and distributions corresponding to X ordinary units. Apart from this numerical scaling, the legal rights and obligations were the same. The anonymised source does not disclose X.
Ownership, registers and liquidation
Tokenholders, including fractional-token holders, had an undivided interest in the trust and rights to residual profits and assets, just like ordinary unitholders. The trustee kept a register covering both groups. In winding up, both groups shared the same ranking and came after the trust’s creditors. These rights explained why the digital format did not change the ownership character.
Income pooling and other classifications
The trust expected to receive only tax-exempt income. Its returns were pooled and allocated pro rata by the units held, taking account of each token’s X-unit equivalence. For accounting, the tokens were equity under Singapore Financial Reporting Standard 32. For regulation, units and tokens were treated as an offering of units in a business trust under the Securities and Futures Act.
Tax outcome and its limits
IRAS treated the tokens as equity for income tax. Payments were trust distributions, receiving the same treatment as distributions to ordinary unitholders. The distributions in this case were not taxable in Singapore in the tokenholders’ hands because they came from the trust’s exempt income. This does not establish a blanket exemption for security-token returns from other income sources.
Reference and historical application
Section 10(1) of the then Income Tax Act was the legislative reference. The source directs readers to paragraph 7 of IRAS’s Digital Tokens tax guide. Only the applicant and specified transaction are bound by the ruling, and the published summary is not revised for later changes in law or interpretation.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
Read the official PDF ↗