Author: TaxDAO
1. Major Tax Types and Rates in Thailand
【Corporate Income Tax】 All companies with legal status in Thailand are required to pay taxes at a rate of 30% of net profits, paid every six months. Small companies with registered capital of less than 5 million baht that earn less than 1 million baht in net profit are subject to a tax rate of 20%, while those earning between 1-3 million baht in net profit are subject to a tax rate of 25%. Companies listed on the Stock Exchange of Thailand with net profits of less than 300 million baht are subject to a tax rate of 25%. International financial institutions and regional operating headquarters located in Bangkok are subject to a tax rate of 10% of their net profits. Foreign companies investing in Thailand may enjoy various tax incentives if they register as Thai companies.
【Personal Income Tax】 Thai residents or non-residents who earn legal income or have assets in Thailand are required to pay personal income tax, with the tax year being the calendar year. The tax base is the balance of all taxable income after deducting relevant expenses, and is levied at a progressive rate of five levels from 5% to 37%. Under relevant Thai tax laws, certain types of personal income can be deducted before tax based on relevant standards, such as rental income being deducted at a rate of 10-30% depending on the type of property rental; medical income in professional fees being deductible at a rate of 60%, while other income in professional fees is deductible at a rate of 30%; income from copyright, employment or services is deductible at a rate of 40%; and income from contracts is deductible at a rate of 70%.
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【Value Added Tax】 The standard rate of value added tax (VAT) in Thailand is 7%. Any individual or entity with 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 in Thailand. Importers are required to pay VAT regardless of whether they are registered in Thailand, and customs will collect VAT when goods are imported. When the input tax is greater than the output tax in a given month, taxpayers may apply for a tax refund, which will be returned in cash or offset in the following month. Taxpayers enjoy a tax refund for zero-rated goods. Input tax related to entertainment expenses is not deductible, but can be deducted as a cost when calculating corporate income tax.
【Specific Business Tax】 Industries subject to specific business tax include banking, finance and related businesses, life insurance, pawnbroking and brokerage, real estate, and other businesses specified in royal decrees. The tax rate is 3% for interest, depreciation, service charges, and foreign exchange profits in the banking, finance, and related businesses, 2.5% for interest, service charges, and other fees in life insurance, 2.5% for interest, fees, and sales of expired property in pawnbroking and brokerage, 3% for the total income of the real estate industry, 3% for the price difference between the sale price and the repurchase price in repurchase agreements, and 3% for interest, discounts, and service charges in agency business. In addition, a local tax of 10% is levied on the basis of the specific business tax.
2. Thai Digital Asset Tax
Recently, digital assets have quickly gained popularity among Thai investors. According to the “Digital Global Overview Report 2022” released by the creative agency “We Are Social” and the social media management platform “Hootsuite”, 20.1% of Thais hold cryptocurrencies, compared to a global average of 10.2%. Despite the volatile cryptocurrency market, this investment still holds great appeal for Thai investors.
(I) Definition
According to the “Emergency Decree on Digital Asset Businesses 2018”, digital assets consist of cryptocurrencies and digital tokens. “Cryptocurrencies” are electronic data established on a system or electronic network that can be used as currency for the exchange of goods and services, and comply with the regulations of the Thai Securities and Exchange Commission (SEC). “Digital tokens” are digital recording tools established on a system or electronic network that have intrinsic value and provide their holders with assets or utility rights that can be traded.
(II) Digital Asset Tax
Once digital assets generate income, profits, or benefits in Thailand, the holder must pay taxes. The “Thai Revenue Code” stipulates five tax types applicable to digital asset transactions:
1. Withholding Tax (WHT)
Only profits from cryptocurrency and digital token transactions (such as sales and exchanges) and profits or rewards 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 juristic person that does not conduct business in Thailand but receives taxable income from Thailand or payment made in Thailand, the tax rate is 15%. If the transaction is conducted on a digital asset exchange that has been approved by the Thai SEC and the Ministry of Finance, the payer is not required to withhold tax.
2. Personal Income Tax (PIT)
Profits from digital assets are subject to progressive personal income tax, with a maximum rate of 35%. Anyone who receives digital asset income in the following ways is considered to have received “taxable income” and must pay personal income tax:
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Cryptocurrency or digital token transactions: refers to the sale, exchange, transfer, or disposal of digital assets.
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Cryptocurrency mining: mining is not considered taxable income until the digital asset is traded.
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Cryptocurrency income in the form of wages or salaries: refers to income earned from employment, self-employment, or performing work.
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Gifts or airdrops of cryptocurrencies or digital tokens: refers to receiving cryptocurrency or digital tokens as gifts or airdrops.
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Investment in digital assets: such as pledging, etc.
For trading, PIT calculations use either the first-in, first-out (FIFO) or moving average cost (MAC) method. For mining, the FIFO method must be used, and mining costs can be deducted as expenses. The tax calculation method for cryptocurrency income obtained in the form of wages or salaries, obtained as gifts or airdrops, or obtained in other ways can be based on the value at the time of use or based on reliable data sources and the value or average price on the day the cryptocurrency was acquired.
The cost of each type of digital asset must be calculated separately. Once a calculation method is chosen, it must be used throughout the entire tax year. As of May 14, 2018, if a digital asset transaction is conducted through an SEC-approved exchange platform, trading losses can be offset against accrued profits in the same tax year. Taxpayers can use WHT amounts as tax credits to offset calculated PIT.
3. Corporate Income Tax (CIT)
The corporate income tax rate is 20% of net profit. Corporations that have received investment incentives under investment promotion (i.e., BOI or EEC) laws or regulations are eligible for reduced or exempted corporate income tax.
4. Value Added Tax (VAT)
According to Section 77/1 (10/1) of the Revenue Code, “electronic service” means a service, including intangible property, provided via the Internet or any other electronic network. Digital assets are considered an electronic service, so companies that sell products to customers or provide services related to digital asset transactions must levy a 7% VAT on the sale price.
However, the Thai government has issued the VAT exemption act 2022 (No. 744), announcing that from April 1, 2022 to December 31, 2023, the transfer of digital assets completed on the SEC-approved digital asset trading center and the transfer of public digital currency issued by the Bank of Thailand (BOT) are exempt from VAT. Digital tokens issued in the primary market or ICO are still subject to VAT, but the tax authority is considering whether to exempt them as well.
5. Specific Business Tax (SBT)
In the future, the Revenue Department may consider changing the tax type for certain types of digital assets from VAT to specific business tax.
Currently, there is no law requiring exchanges to submit investor information to the Revenue Department. However, investors can request their cryptocurrency transaction information from exchanges so that they can calculate and submit taxes correctly.
III. Compliance Process and Future Development Trends of Digital Assets in Thailand
For a long time, Thailand has been resistant to cryptocurrencies and has banned them domestically. In August 2013, the Bank of Thailand declared Bitcoin illegal, banned Bitcoin circulation and transactions, and became the first country in the world to prohibit the use of Bitcoin. However, just six months later, the Bank of Thailand conditionally lifted the ban on Bitcoin, allowing Bitcoin circulation and transactions, but requiring transactions to be limited to within Thailand and settled in Thai baht, without involving other foreign currencies. In recent years, the Thai government has actively embraced blockchain applications such as digital currencies and has adopted relatively relaxed policies.
In May 2018, the Securities and Exchange Commission of Thailand (SEC) 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. The law divides Thailand’s digital asset business operators into digital asset exchanges, digital asset brokers, and digital asset dealers, and requires them to apply for corresponding licenses to engage in relevant business. In addition, an “Urgent Tax Law Amendment” was introduced to regulate the transfer of profit shares or capital gains of cryptocurrencies, and to stipulate withholding tax obligations.
After seeing the significant growth in the size and value of the cryptocurrency market, the Thai Revenue Department had previously planned to strengthen its supervision of cryptocurrency trading. In early January 2022, the Thai Ministry of Finance announced that it would levy a 15% capital gains tax on cryptocurrency trading profits. However, this plan was strongly opposed by the country’s cryptocurrency traders. At the end of January, Thailand decided to temporarily cancel the plan to impose a 15% withholding tax on cryptocurrency trading.
In March 2023, Thai Finance Minister Apisak Tantivorawong will exempt companies that issue digital investment-type tokens from corporate income tax and value-added tax to promote financing. The exemption applies to first- and second-tier markets of companies that issue ICOs and registered entities. Investors in such tokens will also be exempt from value-added tax, but utility tokens will not meet the exemption criteria. The SEC is developing stricter rules for cryptocurrency trading and investment. It remains to be seen whether companies that issue tokens that meet these new tax exemption criteria must register with financial regulators and comply with their rules, but this possibility is high.
Overall, Thailand’s cryptocurrency development has its pros and cons. Despite the government’s efforts to promote cryptocurrency transactions by enacting regulations, the central bank prohibits cryptocurrency as a means of payment, claiming it would impact the country’s financial stability and economy. According to research by cryptocurrency tax software company Recap, Thailand’s capital Bangkok is becoming a new crypto hub. However, competition may be challenging without the clarity enjoyed by Singapore and Hong Kong. Industry analysts say tightening regulations may hinder its ability to become a regional crypto center.
Digital assets have only recently gained widespread attention worldwide and in Thailand. Therefore, Thailand’s relevant 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-related companies and investors need to closely follow regulatory updates and comply with relevant laws and regulations to ensure the legality and soundness of their business and investment.
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