Author | TaxDAO
1. Thailand’s Major Tax Types
【Corporate Income Tax】 All companies in Thailand with legal status must pay taxes according to the law. The tax rate is 30% of net profit, paid every six months. For small companies with registered capital of less than 5 million baht, net profits of less than 1 million baht are taxed at 20%, net profits of 1-3 million baht are taxed at 25%. Companies registered on the Thailand Stock Exchange with net profits less than 300 million baht are taxed at 25%. International financial institutions and regional headquarters located in Bangkok are taxed at 10% of their legal income profits. Companies investing in Thailand from foreign countries can enjoy various tax incentives if they register as Thai companies.
【Personal Income Tax】 Thai residents or non-residents who obtain legal income or assets in Thailand must pay personal income tax, which is based on a calendar year. The tax base is the balance after deducting relevant expenses from all taxable income, which is subject to a five-level progressive tax rate from 5% to 37%. According to Thai tax laws, some personal income can be deducted before tax based on relevant standards. For example, rental income can be deducted by 10-30% depending on the type of property rental; medical income in professional fees can be deducted by 60%, other 30%; copyright income, employment or service income can be deducted by 40%; contractor income can be deducted by 70%.
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【Value-added Tax】 The standard tax rate for Thailand’s value-added tax is 7%. Any individual or entity with an annual turnover of more than 1.2 million baht who sells taxable goods or provides taxable services in Thailand must pay value-added tax in Thailand. Importers, regardless of whether they are registered in Thailand or not, must pay value-added tax, which is levied by the Customs Department when the goods are imported. When the input tax for a month is greater than the output tax, taxpayers may apply for a tax refund, which can be returned in cash or offset against tax in the following month. For zero-rated goods, taxpayers enjoy tax refund treatment. Input tax related to entertainment expenses cannot be deducted, but can be counted as deductible expenses when calculating corporate income tax.
【Special Business Tax】 The industries subject to special business tax include banking, finance and related businesses, life insurance, pawnshops and brokerage businesses, real estate and other businesses specified in royal decrees. Among them, the special business tax for banking, finance and related businesses is 3% of interest, depreciation, service fees, and foreign exchange profit income. The special business tax for life insurance is 2.5% of interest, service fees, and other fee income. The special business tax for pawnshops and brokerage businesses is 2.5% of interest, fees, and income from the sale of expired items. The special business tax for real estate is 3% of total revenue. The special business tax for repurchase agreements is 3% of the price difference between the selling price and the repurchase price. The special business tax for agency business is 3% of interest, discount, and service fee income. In addition to the special business tax, a local tax of 10% is also levied.
2. Thai Digital Asset Tax
In recent years, digital assets have quickly gained popularity among Thai investors. According to the “2022 Global Digital Overview Report” published by creative agency “We Are Social” and social media management platform “Hootsuite”, 20.1% of Thais hold cryptocurrencies, compared to a global average of 10.2%. Despite the volatility of the cryptocurrency market, this investment still has great appeal to Thai investors.
(1) Definition
According to the 2018 Emergency Decree on Digital Asset Businesses, digital assets consist of both cryptocurrencies and digital tokens. “Cryptocurrency” refers to electronic data established on a system or electronic network that can be used as a medium of exchange for goods and services and that complies with the regulations of the Thai Securities and Exchange Commission (SEC). “Digital tokens” refer to digital records established on a system or electronic network that have intrinsic value and confer on their holders the rights to assets or utilities that can be traded.
(2) Digital Asset Tax
In Thailand, holders of digital assets must pay taxes once they generate income, profits, or benefits. The Thai Revenue Code prescribes five types of taxes 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 not conducting business in Thailand but receiving taxable income from Thailand or paid 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 PIT rates, with a maximum rate of 35%. Anyone who earns income from digital assets through the following means is considered to have earned “taxable income” and must pay PIT:
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Cryptocurrency or digital token transactions: refers to the sale, exchange, transfer, or disposition of digital assets.
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Cryptocurrency mining: mining before digital assets are traded is not considered taxable income.
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Cryptocurrency income in the form of salary or wages: income from employment, self-employment, or the performance of work.
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Cryptocurrency or digital token gifts or airdrops: refers to cryptocurrency or digital tokens received as gifts or airdrops.
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Digital asset investments: such as pledging
For trading, PIT calculations use 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 received in the form of wages or salaries, received as gifts or airdrops, or digital tokens may be calculated based on the value at the time of use or based on reliable data sources using the value at the time of acquisition or the average price at the time of acquisition.
The cost of each type of digital asset must be calculated separately. Once the calculation method is selected, it must be used throughout the entire tax year. Starting May 14, 2018, if digital asset transactions are conducted through an SEC-approved exchange platform, trading losses can be offset against accrued profits for the same tax year. Taxpayers can use WHT amounts as tax offsets 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 laws or regulations (i.e., the Investment Promotion Committee or the Eastern Economic Corridor) may be eligible for reduced or exempt corporate income tax.
4. Value-added tax (VAT)
According to Tax Law Article 77/1 (10/1), “electronic services” refer to services provided through the internet or any other electronic network, including intangible assets. Based on this definition, digital assets are considered electronic services, so companies that sell products or provide services to their customers or customers related to digital asset transactions must collect VAT at a rate of 7% of the sale price.
However, the Thai government has issued the Value Added Tax Exemption Act (No. 744) for 2022, announcing that the transfer of digital assets completed on the SEC-approved digital asset trading center and the transfer of publicly issued digital currencies by the Bank of Thailand (BOT) will be exempt from VAT from April 1, 2022, to December 31, 2023. Digital tokens issued in the primary market or ICOs are still subject to VAT, but the Revenue Department 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 of 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 to ensure that they calculate and submit taxes correctly.
III. Compliance Process and Future Development Trends of Digital Assets in Thailand
Thailand has long held a resistant attitude towards cryptocurrencies and has banned them domestically. In August 2013, the Bank of Thailand declared that Bitcoin was illegal and prohibited Bitcoin circulation and trading, becoming the first country in the world to ban the use of Bitcoin. However, only six months later, the Bank of Thailand conditionally lifted the ban on Bitcoin, allowing Bitcoin circulation and trading, but requiring that transactions be limited to within Thailand and settled in Thai baht only, without involving other foreign currencies. In recent years, the Thai government has actively embraced the field of blockchain applications such as digital currencies and adopted relatively relaxed policies.
In May 2018, the Securities and Exchange Commission of Thailand (SEC) officially issued the “Digital Asset Act” to manage the digital asset industry, encourage technological innovation and provide various fundraising tools, while establishing 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 the corresponding licenses to engage in related business. In addition, an “Urgent Tax Law Amendment Act” was introduced to regulate the transfer of profit shares or capital gains of cryptocurrencies, and stipulate the obligation of withholding tax.
After seeing the significant growth in the size and value of the cryptocurrency market, the Thai Revenue Department previously planned to strengthen regulation of cryptocurrency trading. In early January 2022, the Thai Ministry of Finance announced that a 15% capital gains tax would be levied on profits from cryptocurrency trading. However, this plan was strongly opposed by cryptocurrency traders in the country. At the end of January, Thailand decided to temporarily cancel its plan to impose a 15% withholding tax on cryptocurrency trading.
In March 2023, Thai Finance Minister Apisak Tantivorawong announced that companies issuing digital investment-type tokens would be exempt from corporate income tax and value-added tax to promote financing. This exemption applies to companies that issue ICOs and registered entities in the primary and secondary markets. Investors in such tokens will also be exempt from value-added tax, but utility tokens will not qualify for the exemption. The Securities and Exchange Commission of Thailand is developing stricter rules for cryptocurrency trading and investment. It remains to be seen whether companies issuing tokens that meet these new tax incentives will need to register with financial regulatory agencies and comply with their rules, but this is likely.
Overall, the development of cryptocurrency in Thailand has been mixed. While the government has been enacting regulations to promote crypto transactions, the central bank has banned cryptocurrencies as a payment method, claiming that it would affect the country’s financial stability and economy. According to research by crypto tax software company Recap, Bangkok, the capital of Thailand, is becoming a new crypto hub. However, competition could be difficult without the clarity of places like Singapore and Hong Kong. Industry analysts say that tightening regulations could hinder its ability to become a regional crypto center.
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 under review and revision to keep up with the rapid development of digital asset companies. Digital asset-related companies and investors need to closely monitor the dynamic of relevant regulations and comply with relevant laws and regulations to ensure the legality and stability of their business and investment.
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