Performance period：Current Status and Future Trends of Digital Asset Taxation in Thailand

1

I. Major Tax Types and Rates in Thailand

Corporate Income Tax: All companies with juristic personality in Thailand are required to pay taxes according to the law, with a tax rate of 30% on net profits, paid biannually. Small companies with registered capital below 5 million baht and net profits below 1 million baht are subject to a 20% income tax rate. For net profits between 1 million and 3 million baht, the tax rate is 25%. Companies listed on the Stock Exchange of Thailand with a net profit below 300 million baht are subject to a 25% tax rate. International financial institutions and regional operating headquarters located in Bangkok are subject to a tax rate of 10% calculated on their legal income and profits. Foreign companies that invest in Thailand and register as Thai companies can enjoy various tax incentives.

Personal Income Tax: Thai residents or non-residents earning legal income or having assets in Thailand are required to pay personal income tax based on the Gregorian calendar year. The tax base is the balance of all taxable income after deducting relevant expenses, subject to a progressive tax rate ranging from 5% to 37% in five tiers. According to Thai tax laws, certain deductions can be made before calculating taxable income. For example, rental income can be deducted by 10-30% depending on the type of property rental; medical income in professional fees can be deducted by 60%, while other professional fees can be deducted by 30%. Copyright income, employment or service income can be deducted by 40%, and income from contractors can be deducted by 70%.

Value Added Tax (VAT): The standard VAT rate in Thailand is 7%. Any individual or entity with an annual turnover exceeding 1.2 million baht, as long as they sell taxable goods or provide taxable services in Thailand, is required to pay VAT. Importers, regardless of registration status in Thailand, are subject to VAT, which is collected by the customs department upon importation of goods. If the input tax exceeds the output tax in a given month, taxpayers can apply for a refund, which can be reimbursed in cash or used for offsetting taxes in the following month. Taxpayers dealing with zero-rated goods enjoy refund benefits. Input tax related to entertainment expenses cannot be deducted but can be considered as deductible expenses when calculating corporate income tax.

Special Business Tax: Industries subject to special business tax include banking, finance and related businesses, life insurance, pawnshops and brokerage businesses, real estate, and other businesses stipulated by royal decree. For banking, finance, and related businesses, a tax rate of 3% is applied to interest, depreciation, service fees, and foreign exchange profit income. Life insurance is subject to a tax rate of 2.5% on interest, service fees, and other fee income. Pawnshops and brokerage businesses are subject to a tax rate of 2.5% on interest, fees, and income from the sale of expired goods. The real estate industry is subject to a tax rate of 3% on total income. Repurchase agreements are subject to a tax rate of 3% on the price difference between the sale price and repurchase price. Agency businesses are subject to a tax rate of 3% on interest, discounts, and service fee income. In addition to the special business tax, a local tax of 10% may also be imposed.

II. Digital Asset Tax in Thailand

In recent years, digital assets have gained rapid popularity among Thai investors. According to the "Digital 2022 Global Overview Report" released by creative agency "We Are Social" and social media management platform "Hootsuite", 20.1% of Thais own cryptocurrencies, while the global average is 10.2%. Despite the volatility of the cryptocurrency market, this investment still holds great appeal for Thai investors.

Definition

According to the 2018 Emergency Decree on Digital Asset Businesses, digital assets consist of cryptocurrencies and digital tokens. "Cryptocurrency" refers to electronic data established on a system or electronic network that serves as a medium of exchange for goods and services, complying with the regulations of the Securities and Exchange Commission (SEC) of Thailand. "Digital tokens" refer to digital records established on a system or electronic network that have intrinsic value and confer rights to their holders for tradable assets or utilities.

Digital Asset Tax

In Thailand, holders of digital assets are required to pay taxes once they generate income, profits, or gains. The Thailand Revenue Code establishes five tax types applicable to digital asset transactions:

Withholding Tax (WHT): Withholding tax is applicable only to profits from cryptocurrency and digital token transactions (such as sales and exchanges) and profits or rewards from digital token mining. If the investor is an individual, the tax rate is 15%. If the investor is a foreign company or juristic person not conducting business in Thailand but receives taxable income from Thailand or paid locally in Thailand, the tax rate is 15%. If the transactions are conducted on a digital asset exchange approved by the Thai Securities and Exchange Commission (SEC) and the Ministry of Finance, the payer is not required to deduct withholding tax.

Personal Income Tax (PIT): Profits from digital assets are subject to progressive personal income tax (PIT), with the maximum rate reaching 35%. Any person who earns income from digital assets through the following means is considered to have earned "taxable income" and is subject to personal income tax:

-Cryptocurrency or digital token transactions: Referring to the sale, exchange, transfer, or disposal of digital assets.

-Cryptocurrency mining: Mining is not considered taxable income until the digital assets are traded.

-Cryptocurrency earnings in the form of salaries or wages: Referring to income from employment, self-employment, or the performance of work.

-Gifts or airdrops of cryptocurrency or digital tokens: Referring to receiving gifts or airdrops of cryptocurrency or digital tokens.

-Investment in digital assets: Such as pledging, etc.

For transactions, the calculation of PIT uses the First-in-First-out (FIFO) or Moving Average Cost (MAC) methods. For mining, the FIFO method must be used, and mining costs can be deducted as expenses. Cryptocurrency income received in the form of salaries or wages, as well as cryptocurrency received as gifts or airdrops, can be calculated based on the value at the time of use or by referring to reliable data sources using the value at acquisition or the average price on the acquisition date.

The cost of each type of digital asset must be calculated separately. Once the calculation method is chosen, it must be used throughout the entire tax year. Starting from May 14, 2018, if digital asset transactions are conducted on an SEC-approved exchange platform, trading losses can be offset against accrued profits within the same tax year. Taxpayers can use the WHT amount as a tax credit to offset the calculated PIT.

Corporate Income Tax (CIT): The corporate income tax rate is 20% of net profit. Legal entities that have obtained investment privileges under the Investment Promotion (i.e., the Investment Promotion Committee or Eastern Economic Corridor) laws or regulations may be eligible for reduced or waived corporate income tax.

Value Added Tax (VAT): According to Section 77/1 (10/1) of the Revenue Code, "electronic services" refer to services, including intangible assets, provided through the internet or any other electronic network. Digital assets are considered electronic services under this definition. Companies selling products or providing services to their customers or clients involved in digital asset transactions must collect VAT at a rate of 7% based on the selling price.

However, the Thai government has issued the VAT exemption legislation (No. 744) for 2022, announcing the exemption of VAT on the transfer of digital assets completed within SEC-approved digital asset exchanges and transfers of digital currencies issued by the Bank of Thailand (BOT) from April 1, 2022, to December 31, 2023. VAT still applies to digital tokens issued in the primary market or through Initial Coin Offerings (ICOs), but the Revenue Department is considering whether to exempt them as well.

Specific Business Tax (SBT): In the future, the Revenue Department may consider changing the tax category of certain types of digital assets from VAT to Specific Business Tax.

Currently, there is no legal requirement for exchanges to submit investor information to the Revenue Department. However, investors can request their cryptocurrency transaction information from the exchanges to ensure they can accurately calculate and submit their taxes.

III. Compliance Process and Future Trends of Digital Assets in Thailand

Thailand has long held a resistant attitude towards cryptocurrencies and has banned their use domestically. In August 2013, the Thai central bank declared Bitcoin illegal and prohibited its circulation and transactions, becoming the first country in the world to ban the use of Bitcoin. However, just six months later, the Thai central bank conditionally lifted the ban on Bitcoin, allowing its circulation and transactions but requiring that transactions be limited to within Thailand and settled in Thai baht without involving other foreign currencies. In recent years, the Thai government has actively embraced the field of blockchain applications, including digital currencies, and has adopted relatively relaxed policies.

In May 2018, the Securities and Exchange Commission (SEC) of Thailand officially issued the "Digital Asset Act" to regulate the digital asset industry, encourage technological innovation, provide various fundraising tools, and establish mechanisms to maintain macroeconomic stability. This law categorizes digital asset operators in Thailand as digital asset exchanges, digital asset brokers, and digital asset dealers, and requires them to apply for the respective licenses to engage in relevant business activities. In addition, an "Emergency Tax Law Amendment" was introduced to regulate the transfer of profits or capital gains from cryptocurrencies and establish withholding tax obligations.

After witnessing significant growth in the size and value of the cryptocurrency market, the Thai Revenue Department had previously planned to strengthen its regulation of cryptocurrency transactions. In early January 2022, the Thai Ministry of Finance announced that a 15% capital gains tax would be levied on profits from cryptocurrency transactions. However, this plan faced strong opposition from cryptocurrency traders in the country. At the end of January, Thailand decided to temporarily suspend the plan to impose a 15% withholding tax on cryptocurrency transactions.

In March 2023, the Thai Minister of Finance announced the exemption of corporate income tax and value-added tax for companies issuing digital investment tokens to promote financing. This exemption applies to companies issuing ICOs and registered entities in the primary and secondary markets. Investors in such tokens will also be exempt from value-added tax, although utility tokens will not qualify for the exemption. The Securities and Exchange Commission of Thailand is in the process of formulating stricter rules for cryptocurrency trading and investments. It remains to be seen whether companies issuing tokens that meet these new tax exemption criteria will need to register with financial regulatory bodies and comply with their rules, but there is a strong possibility of this requirement.

Overall, the development of cryptocurrencies in Thailand is a mix of positive and negative factors. Although the government has been introducing regulations to promote crypto transactions, the central bank still prohibits cryptocurrencies as a payment method, citing concerns about financial stability and the economy. According to research by the cryptocurrency tax software company, Recap, the Thai capital, Bangkok, is emerging as a new crypto hub. However, without the clarity seen in places like Singapore and Hong Kong, competition could be challenging. Industry analysts suggest that tighter regulations could impede its ability to become a regional crypto hub.

Digital assets have only recently gained widespread attention in Thailand and around the world. Therefore, Thai laws and regulations, especially tax laws and regulations, are still under review and revision to keep up with the rapid development of digital asset businesses. Digital asset companies and investors need to closely monitor regulatory developments and comply with relevant laws and regulations to ensure the legality and stability of their businesses and investments.

1

1