After several public hearing sessions and comments from different stakeholders, the Thai Revenue Department (RD) has finally launched the first official guidelines governing the personal income tax on cryptocurrency and digital trade, which applies to the year 2021. The guidelines present exhaustive technical models for the calculation of the assessable income derived from cryptocurrencies and digital tokens. The guidelines provide (i) a definition of cryptocurrency and digital token, and (ii) elaborate on the taxation of cryptocurrencies and digital tokens, which are categorized into five types, depending on how the taxable income is derived (trading, mining, remuneration, gift, return on investment).
Cryptocurrencies and digital tokens can be defined 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.
Cryptocurrency Taxation
According to the guidelines announced by the Revenue Department (RD), the taxation of cryptocurrencies and digital tokens can be categorized into five types. Each type represents a different approach on how the assessable income is taxed. Any taxpayer who falls under one of these conditions is subject to paying taxes according to the procedures specified in the Thai Revenue Code.
Figure 1. Taxes on cryptocurrencies and digital tokens
1. Cryptocurrency Trading
The income derived from trading (exchanging, selling, transferring, or disposing of cryptocurrency) is regarded as assessable income under Section 40 (4) (g) of the Revenue Code Amendment Act (No. 19)[1].
Calculation of a cryptocurrency’s price:
1. The First In, First Out (FIFO) method assumes that cryptocurrencies or digital tokens purchased first are sold first. Hence, capital gains in each transaction are calculated based on the prices of the oldest cryptocurrencies in a portfolio. For example, an investor purchases 200 XYZ coins on Monday at a cost of $1 each, and 200 more on Tuesday at $1.25 each. FIFO states that if the investor sold 200 XYZ coins on Wednesday for $1.5 each, the capital gains would be $100 ($0.5 x 200 XYZ coins), because $1 per coin was the price of each of the first XYZ coins in the investor’s portfolio. The $1.25 coins would be recorded as intangible assets in the tax declaration.
2. The Moving Average Cost (MAC) is the arithmetic mean obtained by summing up the prices of all cryptocurrencies purchased in each accounting period, divided by the total number of cryptocurrencies owned. For example, an investor purchases 200 ABC coins in January at a cost of $1 each, and 300 more in November at $1.50 each, and sells 200 ABC coins in December at $2 each. The MAC states that the cost of intangible assets and the cost of coin sold are set at the average cost of $1.30 ($1 x 200 + $1.50 x 300)/(200 + 300).
3. Any loss arising from cryptocurrency and digital token trades can be offset against revenue accrued in the same accounting period. However, this only applies to transactions made through the exchange platform listed under the supervision of the Security and Exchange Commission.
N.B.: when any method is selected, that specific method must be used throughout that accounting period.
2. Cryptocurrency Mining
Any cryptocurrencies received from mining are not deemed to be assessable income unless it is disposed of, sold, exchanged, or transferred. The revenue derived from mining is classified as assessable income under 40(8)[2].
✓ Expenditures incurred from mining (e.g., computer maintenance fee, wages, brokerage fees, utility bills, etc.) can be deducted as expenses, according to the Thai Revenue Code, on a necessity and appropriateness basis.
✓ For the calculation of a cryptocurrency’s price, the First In, First Out (FIFO) method is applied.
3. Remuneration Paid in Cryptocurrency
The income derived from cryptocurrency remuneration can be classified into: (i) employment income[3]; and (ii) earned income from self-employment or performance of work[4]. Taxpayers must declare the income and specify the type of remuneration.
✓ The amount of tax withheld from the remuneration must be included to calculate the cryptocurrency price on the date in which it will be sold.
✓ The cryptocurrency price used for the calculation of tax liabilities can be based on either: (i) the trading price on the payment date; or (ii) the average daily price on the payment date.
4. Gifts, Prizes and Awards
Monetary awards, gifts, prizes and cash equivalents are subject to personal income taxation pursuant to section 40 (8) of the Royal Decree issued under the Revenue Code No. 19.
✓ The cryptocurrency price used for the calculation of tax liabilities can be based on either: (i) the trading price on the payment date; or (ii) the average daily price on the payment date.
5. Return on Investment
✓ Returns deriving from digital token investments are classified as assessable income under Section 40 (4) (g) of the Royal Decree No. 19, whereas returns deriving from cryptocurrency investments are classified as assessable income under Section 40 (8);
✓ The cryptocurrency price used for the calculation of tax liabilities can be based on either: (i) the trading price on the payment date; or (ii) the average daily price on the payment date.
✓ When any method is selected, that specific method must be used throughout that accounting period.
For inquiries about cryptocurrency and digital token taxation, digital asset tax advisory, or bookkeeping services, please contact us at [email protected]
Notes:
[1] Royal Decree on Amendment to the Revenue Code (No. 19) (“Royal Decree No. 19”), B.E. 2561, Section 40 (4) (g): capital gains deriving from the transfer of cryptocurrencies or digital tokens. 14 May 2018.
[2] Ibid., Section 40 (8): income from business, commerce, agriculture, industry, transport, or any other activity not specified in (1) – (7).
[3] Ibid., Section 40 (1): income derived from employment, whether in the form of salary, wage, per diem, bonus, bounty, gratuity, pension, house rent allowance, monetary value of rent-free residence provided by an employer, payment of debt liability of an employee made by an employer, or any money, property or benefit derived from employment
[4] Ibid., Section 40 (2): income derived from a post or from performance of work, whether in the form of fee, commission, discount, subsidy, meeting allowance, gratuity, bonus, house rent allowance, monetary value of rent-free residence provided by a payer of income, payment of debt liability of a taxpayer made by a payer of income, or any money, property or benefit derived from a post or from performance of work, whether such post or performance of work is permanent or temporary.