The Rising Popularity of Digital Assets in Thailand: Opportunities and Tax Implications compared to traditional assets, despite higher risks.
Digital assets have rapidly gained popularity among Thai investors in recent years due to their potential for dramatic increases in value compared to traditional assets, despite higher risks.
The Emergency Decree on Digital Asset Businesses in 2018 defines digital assets as cryptocurrencies and digital tokens. Cryptocurrencies, especially, offer the potential for incredible returns and profits, and they can be easily traded through online applications.
Despite the high volatility in the crypto market, investing in cryptocurrencies remains extremely attractive to Thai investors.
Additionally, digital tokens are now catching the interest of Thai entities, as they seek to expand their fundraising strategies beyond the conventional IPO of a company’s ordinary shares.
Entities are now offering digital tokens through the Initial Coin Offering (ICO) Portal, which has been approved by the Securities and Exchange Commission (SEC) of Thailand.
Investors who hold digital tokens may receive benefits specified in the prospectus or white paper, such as income or profit-sharing through an investment token, or the right to use a product or service through a utility token.
With income, profits, or benefits arising from digital assets, taxation becomes inevitable. The Revenue Code of Thailand prescribes five types of taxes applicable to individuals and businesses dealing with digital assets:
- Withholding Tax: Profits from trading cryptocurrencies and digital tokens, as well as profits or remuneration from farming digital tokens, are subject to withholding tax at a rate of 15% for individual investors and foreign companies or juristic persons not conducting business in Thailand but receiving assessable income from or in Thailand. Transactions conducted through approved digital asset exchanges are exempt from withholding tax.
- Personal Income Tax: Individuals earning income from digital assets through trading, mining, earnings as salary or wages, or receiving them as gifts or airdrops are subject to personal income tax. The cost of digital assets must be calculated using recognized accounting standards like FIFO or MAC, applied consistently throughout the tax year.
- Corporate Income Tax: The corporate income tax rate is 20% of net profit for businesses dealing with digital assets. Juristic persons enjoying investment promotion may receive a reduction or exemption from corporate income tax under relevant laws or regulations.
- Value Added Tax (VAT): Digital assets are considered electronic services, and business operators selling products or providing services related to digital asset transactions must collect VAT at 7% of the sale price from clients or customers.
- Specific Business Tax: In the future, the revenue department may consider changing the tax type from VAT to specific business tax for certain types of digital assets.
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As the popularity of digital assets is relatively recent, Thai laws and regulations, especially those related to taxation, are still undergoing review and amendments to keep pace with the fast-growing digital asset industry. Crypto and digital token investors, as well as digital asset business operators, should closely monitor the status of regulations and upcoming amendments expected to be implemented in the current or future years.
Source: Asia Business Law Journal