According to the Digital 2022 Global Overview Report, 20% of the Thai population owns crypto-currencies, which is the highest proportion worldwide. Even though crypto payments were banned later, the Thai authorities are more likely to want to develop this new trend and have therefore issued relaxed tax rules that may be interesting for investors.
The Thai Revenue Department (RD) gives a definition of cryptocurrencies and digital tokens (jointly referred to as “digital assets”) as follows:
“Cryptocurrency” refers to electronic data built on systems or electronic networks to be used as currency for the exchange of goods and services, in compliance with the regulations of Thailand’s Securities and Exchange Commission (SEC).“Digital Token” refers to digitally recorded instruments built on systems or electronic networks, which have an intrinsic value and grant their holders rights to tradable assets or utilities.
Profits derived from digital assets are taxed under the progressive PIT up to 35%. In February 2022, the RD has launched official guidelines concerning the PIT on digital assets which apply to the tax year 2021. The transactions have been split into 5 categories:
As an individual taxpayer, you are required to include any income from digital assets when filing your annual returns (PND90, PND91). You can use the WHT amount as a tax credit to offset against the calculated PIT.
For trading, PIT is calculated using either the First In First Out (FIFO) or Moving Average Cost (MAC) methods. For mining, using the FIFO method is mandatory and the mining costs (bills, wages, computer maintenance…) can be deducted as expenses. PIT owed due to remuneration, gifts, return on investment is calculated using either the: (i) the trading price on the payment date; or (ii) the average daily price on the payment date.
The FIFO method assumes that the digital assets purchased first are sold first. For example, you purchase 100 A-coins in February at $1 each and 400 A-coins in August at $1.5 each. If you sell 300 A-coins in October at $2 each, you will make a taxable profit of $200 (100 x ($2 - $1) + 200 x ($2 - $1.5)).
The MAC method adds up the prices of all digital assets purchased during the year and divides the sum by the total digital assets owned. For example, you purchase 100 A-coins in February at $1 each and 400 A-coins in August at $1.5 each. The average price of a coin is: $1 x 100 + $1.5 x 400 / (100 + 400) = 700 / 500 = $1.4. If you sell 300 A-coins in October at $2 each you will make a taxable profit of $180 (($2 - $1.4) x 300).
Tax must be calculated by each coin type. Once a method has been selected, it must be kept during the whole fiscal year. From 14 May 2018 onwards, any loss from digital asset trading can be offset against profits incurred in the same tax year if such trading is conducted through the exchange platforms approved by the SEC.
All gains made from digital assets trading are subject to a 15% WHT. This concerns:
If the transaction is conducted via digital asset exchanges approved by the SEC, the payer does not have to deduct WHT.
A digital asset is considered a type of electronic service, therefore companies that sell products or provide services to clients related to digital assets must collect VAT at 7% of the sale price.
However, the Royal Thai Government Gazette has formally announced a VAT exemption for the transfer of digital assets traded in the exchange platforms approved by the SEC and for the transfer of digital currencies launched by the Bank of Thailand (Retail Central Bank Digital Currency). This exemption was in place from April 1, 2022, until December 31, 2023.
Calculating your taxable income using the indicated methods can be a hassle; therefore, Juslaws & Consult can assist you with preparing and filing your Personal Income Tax (PIT) returns. If you are considering setting up a crypto-asset related business in Thailand, we can also guide you through this process to ensure compliance with licensing requirements and other regulations. The authorities have approved major tax breaks for both direct and indirect investments in crypto startups, making this an opportune time to enter the Thai crypto market.
