Singapore | IRS releases new tax guidance on staking rewards

The Internal Revenue Service in the United States (“IRS”) has released a new tax guidance (Notice 2023-14 accessible here) which outlines how and when staking rewards (i.e. rewards distributed when staking cryptocurrency native to a proof-of-stake blockchain) are taxed.
 
In summary, the IRS has confirmed that validation rewards which the taxpayer has received is taxable in the year in which the taxpayer gains “dominion and control” over the validation rewards. “Dominion and control” refer to the ability to sell, exchange or otherwise dispose of the cryptocurrencies received as validation rewards. The fair market value of these cryptocurrencies will be assessed as of the date the taxpayer gains dominion and control over the validation rewards.
 
The position summarised above is maintained by the IRS even if the taxpayer stakes cryptocurrency native to a proof-of-stake blockchain through a cryptocurrency exchange and the taxpayer receives additional cryptocurrencies as rewards as a result of the validation.
 
The IRS’ position is different from the taxation treatment in Singapore, which taxes staking rewards only upon their disposal. We previously published a legal update covering Singapore’s taxation approach accessible here.