Thailand's digital asset tax status and future trends

Author: TaxDAO

1. Main tax types and tax rates in Thailand

**【****Corporate Income Tax】**Companies with legal personality in Thailand are required to pay taxes according to the law. The tax rate is 30% of the net profit and is paid every six months. For small companies with a registered capital of less than 5 million baht, if the net profit is less than 1 million baht, the income tax shall be calculated at 20%; if the net profit is between 1 million and 3 million baht, the income tax shall be calculated at 25%. If the net profit of a company registered on the Stock Exchange of Thailand is less than 300 million baht, it is calculated and paid at 25%. International financial institutions and regional business headquarters located in Bangkok are calculated and paid at 10% of legal income and profits. If a foreign company investing in Thailand is registered as a Thai company, it can enjoy a variety of tax incentives.

[Individual Income Tax] Thai residents or non-residents who obtain legal income or assets in Thailand in Thailand are subject to personal income tax, and the tax year is the Gregorian calendar year. The tax base is the balance of all taxable income minus related expenses, which is levied at five-level progressive tax rates ranging from 5% to 37%. According to the relevant tax laws of Thailand, some personal income can be deducted before tax according to relevant standards. For example, rental income can be deducted according to the type of property rental, ranging from 10-30%; medical income in professional fees can be deducted 60%, and other 30% , 40% of copyright income, employment or service income can be deducted, and 70% of contractor income can be deducted.

【Value Added Tax】 The general tax rate of Thailand's value added tax rate is 7%. Any individual or unit with an annual turnover exceeding 1.2 million baht shall pay VAT in Thailand as long as it sells taxable goods or provides taxable services in Thailand. Regardless of whether the importer is registered in Thailand or not, the value-added tax shall be paid by the Customs Department when the goods are imported. When the monthly input tax is greater than the output tax, the taxpayer can apply for a tax refund, and can return cash or tax credit in the next month. For zero-rated goods, taxpayers enjoy tax refund treatment. Input tax related to entertainment expenses is not deductible, but can be considered as a deductible expense in the calculation of corporate income tax.

**【Special Business Tax】**The industries subject to special business tax include banking, finance and related businesses, life insurance, pawnbroking and brokerage, real estate and other businesses regulated by the Royal Act. Among them, banking, financial and related businesses are 3% of interest, depreciation, service fees, and foreign exchange profit income; life insurance is 2.5% of interest, service fees and other fee income; 2.5% of the income, 3% of the total income for the real estate industry, 3% of the difference between the selling price and the repurchase price for the repurchase agreement, and 3% for the interest, discount, and service fee income received by the agency business. At the same time, a local tax of 10% will be added on top of the special business tax.

2. Thailand Digital Asset Tax

In recent years, digital assets have quickly won the favor of Thai investors. According to the 2022 Digital Global Overview Report by creative agency We Are Social and social media management platform Hootsuite, 20.1 percent of Thais hold cryptocurrencies, compared to a global average of 10.2 percent. Despite the volatility in the cryptocurrency market, the investment remains attractive to Thai investors.

(1) 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 can be exchanged for goods and services as currency, in compliance with the regulations of the Thai Securities and Exchange Commission (SEC). "Digital Token" means a digital record built on a system or electronic network that has intrinsic value and entitles its holder to a tradable asset or utility.

(2) Digital asset tax

In Thailand, once digital assets generate income, profits or benefits, the holders must pay taxes. The Thai Tax Code stipulates five types of taxes applicable to digital asset transactions:

1 Withholding Tax (WHT)

Only profits from transactions in cryptocurrencies, digital tokens such as sale and exchange, and profits or remuneration from digital token mining are subject to withholding tax. If the investor is an individual, the tax rate is 15%; if the investor is a foreign company or legal person that does not conduct business in Thailand, but the taxable income obtained is from Thailand or paid locally in Thailand, the tax rate is 15%. The payer does not have to deduct withholding tax if the transaction is made on a digital asset exchange that has been approved by the Thai SEC and the Ministry of Finance.

2. Personal Income Tax (PIT)

Profits from digital assets are taxed under a progressive personal income tax of up to 35%. Anyone who obtains digital asset income through the following methods will be deemed to have obtained "taxable income" and is subject to personal income tax:

• Cryptocurrency or digital token transaction: Refers to the sale, exchange, transfer or disposal of digital assets.
• Cryptocurrency Mining: Mining is not considered taxable income until digital assets are traded. *Cryptocurrency benefits in the form of salaries or wages: Refers to income from employment, self-employment or performance of work.
• Gift or airdrop of cryptocurrencies or digital tokens: Refers to cryptocurrencies or digital tokens that have been gifted or airdropped.
• Investment in digital assets: such as pledge, etc.

For transactions, PIT is calculated using the first-in-first-out (FIFO) or moving average cost (MAC) method. For mining, the first-in, first-out method must be used, and mining costs are deductible as an expense. For cryptocurrency income obtained in the form of wages or wages, cryptocurrency or digital tokens received as a gift or airdrop, the tax calculation method can be calculated according to the value at the time of use, or according to reliable data sources, according to the time when the cryptocurrency is acquired. or the average price on the date of acquisition.

The cost of each digital asset is calculated separately. Once the calculation method is selected, it must be used throughout the tax year. From May 14, 2018, if the digital asset transaction is conducted through an SEC-approved exchange platform, the transaction loss can be offset against the accrued profit of the same tax year. Taxpayers can use the WHT amount as a tax credit to offset the calculated PIT.

3 Corporate Income Tax (CIT)

The corporate income tax rate is 20% of net profit. According to investment promotion (i.e. Investment Promotion Commission or Eastern Economic Corridor) laws or regulations, legal persons that have received investment incentives may pay less or be exempt from corporate income tax.

4. Value Added Tax (VAT)

According to Article 77/1 (10/1) of the Tax Code, "electronic services" means services, including intangible assets, provided through the Internet or any other electronic network. Under this definition, a digital asset is considered an electronic service, and therefore, a company that sells products or provides services to its customers or customers related to digital asset transactions must charge VAT at 7% of the sale price.

However, the Thai government has issued the 2022 Value-Added Tax Exemption Act (No. 744), announcing that from April 1, 2022 to December 31, 2023, digital asset transfers completed in digital asset trading centers approved by the Securities Regulatory Commission and Transfers of public digital currencies issued by the Bank of Thailand (BOT) are exempt from VAT. Digital tokens issued on the primary market or through ICOs are still subject to VAT, but the tax office is considering whether to exempt this as well.

5. Specific Business Tax (SBT)

In the future, the tax office may consider changing the taxation of certain types of digital assets from value-added tax to special business tax.

Currently, there is no law forcing exchanges to submit investor information to the tax office. However, investors can request information on their cryptocurrency transactions from exchanges so that they can properly calculate and file taxes.

3. Thailand’s digital asset compliance history and future development trend

**Thailand has long been resistant to cryptocurrencies, banning cryptocurrencies in the country. **In August 2013, the Bank of Thailand announced that Bitcoin was illegal and prohibited the circulation and transaction of Bitcoin, becoming the first country in the world to ban the use of Bitcoin. But only 6 months later, the Central Bank of Thailand conditionally lifted the ban on bitcoin, allowing bitcoin circulation and trading, but requiring transactions to be limited to Thailand and settled in Thai baht, and no other foreign currencies may be involved. **In recent years, the Thai government has actively embraced blockchain applications such as digital currency, and has further adopted relatively loose policies. **

In May 2018, Thailand's Securities and Exchange Commission (SEC) officially issued the "Digital Asset Act" to manage the digital asset industry, encourage technological innovation and provide various financing tools, while establishing a mechanism to maintain macroeconomic stability. The law divides digital asset business operators in Thailand into digital asset exchanges, digital asset brokers, and digital asset dealers, and requires them to apply for corresponding licenses to engage in related businesses. In addition, an Emergency Decree on the Amendment of the Tax Code was introduced to regulate the transfer of profit shares or capital gains in cryptocurrencies and to impose withholding tax obligations.

**After seeing the crypto market grow significantly in size and value, Thailand’s tax agency had previously planned to strengthen regulation of cryptocurrency transactions. **In early January 2022, Thailand’s Ministry of Finance announced that it will impose a 15% capital gains tax on profits from cryptocurrency transactions. However, the plan has faced strong opposition from cryptocurrency traders in the country. At the end of January, Thailand decided to temporarily cancel plans to impose a 15% withholding tax on cryptocurrency transactions.

In March 2023, Thailand's Ministry of Finance announced that companies that issue digital investment tokens will be exempted from corporate income tax and value-added tax to facilitate financing. This exemption applies to the primary and secondary markets for companies and registered entities issuing ICOs. Investors in such tokens will also be exempt from VAT, but utility tokens will not qualify for the exemption. Thailand's Securities and Exchange Commission is developing stricter rules for cryptocurrency trading and investing. Whether companies issuing tokens eligible for these new tax breaks will have to register with the financial regulator and abide by its rules remains to be seen, but it is a strong possibility.

Overall, cryptocurrency developments in Thailand are mixed. **While the government has been introducing regulations to facilitate crypto transactions, the central bank banned cryptocurrencies as a form of payment, claiming it would affect the country's financial stability and economy. Bangkok, the capital of Thailand, is emerging as a new crypto hub, according to research by crypto tax software firm Recap. However, without the clarity of Singapore and Hong Kong, competition could be difficult. **Industry analysts say tighter regulation could hamper its ability to become a regional crypto hub. **

Digital assets have only recently gained widespread attention around the world and in Thailand. Therefore, relevant laws and regulations in Thailand, especially tax laws and regulations, are still being reviewed and revised to keep up with the rapid development of digital asset companies. **Digital asset-related companies and investors need to pay close attention to relevant regulations and abide by relevant laws and regulations to ensure the legality and soundness of their business and investment.