Digital assets pursuant to the Emergency Decree on Digital Asset Businesses B.E.2561 (2018) consist of cryptocurrencies and digital tokens ("Digital Assets"). Such Digital Assets have recently become rapidly popular among Thai investors over the past few years as their value tends to rise dramatically than other traditional assets, yet with higher risks. Digital Assets, especially cryptocurrency ("Crypto") in Thailand, can yield incredible returns and profits and are easy to trade via online applications nowadays. The 2022 Digital Global Overview Report has revealed that the percentage of Thai people holding Crypto is 20.1% of the total population while the global average rate is 10.2%, which is a surprisingly massive number. Despite the high volatility in the Crypto market, it is undeniable that investing in Crypto is extremely attractive to Thai investors, which explains why there is increased popularity of this type of Digital Asset.
On the other hand, another type of Digital Asset i.e., digital tokens is starting to catch Thai entities' interest, as they aim at expanding their fundraising strategies, besides the common initial public offering of the company's ordinary shares, and this is done by way of offering digital tokens through the Initial Coin Offering Portal ("ICO Portal") approved by the Securities and Exchange Commission, Thailand. Investors of digital tokens may receive benefits attached to the digital tokens as specified in the prospectus or whitepaper e.g., an income or a profit sharing under the investment token, or the right to use a product or service under the utility token, as the case may be.
In this regard, when income, profits, or benefits arise from Digital Assets, taxation is, therefore, inevitable. The Revenue Code of Thailand provides five types of taxes that are applicable to natural and juristic persons dealing with Digital Assets, as follows:
1. Withholding Tax ("WHT")
Only profits derived from trading of cryptocurrency and digital tokens (e.g., sale, exchange), and profits or remuneration derived from farming of digital tokens are subject to WHT.
- 15% in case an investor is an individual;
- 15% in case an investor is a foreign company or juristic person who does not carry out business in Thailand but is receiving assessable income paid from or in Thailand.
In case the transaction is carried out via digital asset exchanges approved by the Securities and Exchange Commission, Thailand ("SEC") and the Minister of Finance ("MOF"), the payer does not have to deduct the withholding tax.
2. Personal Income Tax ("PIT")
Any person who earns an income from Digital Assets in the following manners will be deemed to receive "assessable income" and thus subject to PIT:
- Trading Cryptocurrency or Digital Token
Profits derived from cryptocurrency or digital token sale or exchange are to be considered as an "assessable income". The cost of Crypto and Digital Tokens must be calculated by applying a method recognized in the accounting standards, such as First-in First-out (FIFO) or Moving Average Cost (MAC), which must be calculated separately for each Digital Asset due to their differences. The chosen method must be applied consistently throughout the entire tax year.
Note that any losses occurred from the trading of cryptocurrency and digital tokens via digital asset exchanges approved by the SEC and the MOF can be offset against the profits incurred in the same tax year for the calculation of Personal Income Tax ("PIT"). This tax relief measure is retroactive and shall take effect as of 14 May 2018 (B.E. 2561), onwards. This measure was approved on March 8, 2022.
- Mining Cryptocurrency
Profits derived from mining cryptocurrency are to be considered as an "assessable income". The process of mining cryptocurrency, that is creating new Crypto by "solving mathematic puzzles", will not be considered as an "assessable income" until the Cryptocurrency is traded.
The cost of Cryptocurrency and Digital Tokens must be calculated by applying a method recognized in the accounting standards, such as First-in First-out (FIFO) or Moving Average Cost (MAC), which must be calculated separately for each Digital Asset due to their differences. The chosen method must be applied consistently throughout the entire tax year.
- Earning Cryptocurrency as Salary or Wages
The value of cryptocurrency income received as salary or wages can be treated as cost when it is sold, while the value at the time of acquisition or the average price on the date of acquisition is used to calculate revenue, which shall be a reliable reference price. The chosen method must be applied consistently throughout the entire tax year.
- Gift or airdrop of Cryptocurrency or Digital
Token
As mentioned above, the value of cryptocurrency or digital token income received as salary or wages can be treated as cost when cryptocurrency or digital token is sold, while the value at the time of acquisition or the average price on the date of acquisition is used to calculate revenue, which shall be a reliable reference price. The chosen method must be applied consistently throughout the entire tax year.
- Farming Cryptocurrency or Digital Token (e.g., yield
farming, staking)
The same concept as the previous two cases applies to determine benefits or remuneration derived from farming cryptocurrency or digital tokens.
However, the taxpayer can use the withholding tax amount as a tax credit to offset against the calculated personal income tax when a tax return is filed.
On March 8, 2022, the Cabinet approved that concerning the PIT calculation, a loss from trading the Digital Assets can be offset against the profits incurred in the same tax year, if such trading is carried out through the digital asset exchanges approved by the SEC and MOF, from 14 May 2018, onwards.
3. Corporate Income Tax ("CIT")
The CIT rate is 20% of net profit. Juristic persons which have received investment promotion may receive a reduction of the CIT or may be exempted from paying the CIT under the laws or regulations regarding investment promotion (i.e., Board of Investment or Eastern Economic Corridor).
4. Value Added Tax ("VAT")
According to Section 77/1 (10/1) of the Revenue Code, "Electronic Services" means services including intangible assets which are delivered via the internet or any other electronic networks. The nature of such service must also be substantially rendered automatically and without information technology, such service would be impossible to render. In this regard, Digital Asset is considered a type of electronic service, therefore, business operators who sell products or provide services to their clients or customers related to Digital Asset transactions must collect VAT at the rate of 7% of the sale price from the clients or customers.
On 8 March 2022, the Cabinet approved the VAT exemption for the transfer of Digital Assets via digital asset exchanges approved by the SEC and MOF, as well as the transfer of Crypto issued by the Bank of Thailand in connection with the cryptocurrency development and testing program issued by the Bank of Thailand for public use. On May 24, 2022, the Government formally introduced a (VAT) exemption for transfers of digital assets made on digital asset exchanges. This was enacted by two royal decrees, as follows:
- The Royal Decree issued under the Revenue Code Re: VAT
exemption (No. 744) B.E. 2565 (2022), which rules that the trading
of digital assets on digital asset exchanges shall be exempt from
VAT; and
- The Royal Decree issued under the Revenue Code Re: VAT exemption (No. 745) B.E. 2565 (2022) which rules that trading in Thailand's Retail CBDC issued by the Bank of Thailand under the Cryptocurrency development and testing project for public use shall be exempt from VAT.
The VAT exemptions under both royal decrees shall apply to transactions that occurred from April 1, 2022, to December 31, 2023.
5. Specific Business Tax ("SBT")
In the future, the Revenue Department may consider changing the type of tax from VAT to SBT for some types of Digital Assets.
Since Digital Assets have only recently become popular and widespread around the world and in Thailand, the relevant Thai laws and regulations, especially concerning taxation, are still in the process of being reviewed and amended to keep up with the fast-growing digital asset businesses. It is very important that Crypto and Digital Token investors, as well as digital asset business operators, closely monitor the status of the relevant regulations and the upcoming amendments, which are expected to be implemented this year or the upcoming years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
