Seven statements on crypto taxation in Thailand
Thailand’s Revenue Department and the cryptocurrency taxation
Until the end of 2017, public consciousness made a threefold error by thinking that cryptocurrencies might be
- so highly speculative that wins would not be taxed,
- so highly anonymous, that capital gains would not be discoverable, and
- so highly complex, that the Revenue Department would not be capable to impose existing tax laws.
Such an approach seemed too good to be true. And as often, it turned out to be a naive illusion.
Seven viewpoints of the Revenue Department on digital asset taxation – and why you need a professional tax structuring
This statement reflects the current official viewpoint as publicly announced. There is no guarantee that this legal view remains unchanged in the future.
#1. Fully taxable: From the viewpoint of Thailand’s Revenue Department, Bitcoin taxation is easy: Cryptocurrencies and other coins and tokens are intangible assets. The trade follows general taxation principles. Capital gains of companies are taxed at the regular corporate tax rate of 20% CIT. Capital gains made by individuals are taxed at Thailand’s progressive tax rate of up to 35% PIT.
Our accounting team follows the characterization as “an identifiable non-monetary asset without physical substance” in the meaning of IAS 38 (Intangible Assets). Therefore, accounting is done at cost or revaluation.
#2. Tax events: An increase in value is not taxable. However, a tax event that results in a due and payable tax burden does not only occur, when the digital assets are sold for fiat money (Baht, US$, etc.) but also
- if cryptocurrencies are used to buy goods and services, or
- if digital assets are exchanged against other coins and tokens.
The rearrangement and shifting of a cryptocurrency wallet can, therefore, result in a taxable event, even if the digital wealth remains on the same platform.
#3. Foreign transactions: According to a statement of the bureau of legal affairs at the Revenue Department (“BLARD”) as quoted in Bangkok Post on May 21, 2018, “those who live in Thailand but trade digital assets abroad, … it’s the duty of taxpayers to declare such income, otherwise, they will face both civil and criminal penalties if the Revenue Department discovers the transactions.”
The extended profit tax rules under the Royal Decree would be pretty meaningless if digital transactions on the blockchain and its related profits would be deemed as untaxable foreign income. Instead, the Revenue Department has the standpoint that Thailand’s territory tax system does not exclude crypto profits from domestic taxation if the profit transfer is delayed until the next fiscal year. Blockchain-related profits are not foreign-sourced. The blockchain is everywhere, even in Thailand.
#4. The 2017 taxation: The statement above describes the legal situation in 2018, but potentially also in 2017. It does not base on the 2018-Royal Decrees but on old legislation. Under this view, the high Bitcoin profits made in 2017 are fully taxable and had to be declared in the tax declaration for 2017.
The Revenue Code was amended by the Royal Decree to include
- “a share of profit or any benefit derived from holding or having possession of digital tokens”
- “capital gain from the transfer of cryptocurrencies or of digital tokens”
as assessable taxable income. Whether this describes the final arrangement for crypt-profit taxation or just adds potential circumventions to the already existing rule of full crypto-taxation, might be seen differently.
— Bangkok Lawyer (@bangkoklawyer) September 13, 2019
#5. 15% W/H tax: Under the May 2018-amended Revenue Code, individuals who gain and receive benefits from putting money into digital assets are subject to a 15% withholding tax. Regulations by the Finance Ministry to impose a 15% withholding tax on capital gains and benefits from digital asset transactions for corporate entities have to be observed.
This change in law does not have the character of a tax reduction. It does not allow to deem the withholding tax rate as final taxation. Therefore, to quote the BLARD, “juristic persons and individuals are required to include capital gains and benefits from digital asset transactions in computing income tax.” As a result, the upper limit for Bitcoin taxation remains at 35%, instead of 15%.
#6. 7% VAT: The May-2018 legislation dealt with 7% VAT on a digital asset transaction. The Revenue Department announced to waive this additional tax burden for retail investors who trade cryptocurrencies and digital tokens through digital exchanges.
The Finance Ministry issued ministerial regulations to impose a 15% withholding tax on capital gains and benefits from digital asset transactions for corporate entities. This is not (yet) part of a VAT waiver by the Revenue Department. Therefore, companies making digital-asset-related trades will be liable for a 7% VAT payment from the transaction value, on top of the 15% withholding tax, on top of the 20% CIT.
Private coin sales on a licensed Thai digital asset exchange are not subject to 7% VAT.
#7. ICO taxation: Specific rules apply to ICO Initial Coin Offerings. More details will be provided later.
Cryptocurrencies can utilize traditional capital gains strategies by
- offsetting gains with losses,
- the timing of dispositions to qualify for long-term treatment,
- the tax-effective harvesting of losses and gains.
However, the specific character of the digital coins with zigzagging prices creates additional tools and modules for a highly efficient tax structuring of digital wealth. These and other tax implications had been discussed in the (now pretty outdated) article “Seven questions: Bitcoin taxation in Thailand.”
How to reverse and revert the tax-contamination of digital assets is described at “Seven strategies for tax-contaminated cryptocurrencies“. A big part of how this game is played is to not reveal how this game is played.
— Bangkok Lawyer (@bangkoklawyer) August 23, 2019
Professional services in Thailand’s Fin-Tech sector
PUGNATORIUS Ltd. is the trusted tax advisor for Bitcoin billionaires in Thailand and abroad. Dealing with tons of crypto taxation assignments in the previous years, the tax counsel has a wealth of experiences and background information on tax-efficient coin-structurings, the decision-making process at Thailand’s Revenue Department and the previous and current policy of the governing agencies in the land of smile.
The law firm offers mainly these seven legal and tax services:
- Thai crypto-compliant company formations
- Regulatory-avoiding and tax-efficient cross-border structuring
- Digital asset and financial services licensing
- Blockchain and ICO advisory services
- Thai and cross-border tax structuring
- Cryptotransaction support services
- Legal opinions and professional statements