Income Tax and VAT Exemption for Investment Token Transfer

In line with the “Royal decree issued under the provisions of the Revenue Code Regarding Tax Exemption (No. 779), B.E. 2566,” dated 15th August B.E. 2566 (2023), effective from 16th August 2023 onwards, a notable development in the realm of taxation has emerged, specifically concerning income tax and Value Added Tax (VAT) exemption for investment token transfers. This update pertains to companies or juristic partnerships engaged in the issuance and offering of investment tokens to the public, operating within the ambit of the law on digital asset business. Notably, this revision extends to the retroactive coverage of transfers of investment tokens since 14th May 2018.

Coverage and Eligible Entities

The ambit of this legal update encapsulates companies or juristic partnerships that have embarked on the issuance and public offering of investment tokens since 14th May 2018. An “Investment Token” is defined as a digital token that confers the right upon an individual to partake in an investment within a project or business, as delineated under the purview of the law governing digital asset business.

Tax Measures and Implications

This update heralds a groundbreaking progression in the realm of taxation for investment tokens. Corporate income tax and VAT exemptions are extended to encompass all incomes and VAT bases arising from the transfer of investment tokens offered to the public, specifically in the primary market in compliance with the digital asset businesses law. It is noteworthy that the tax exemption for the transfer of investment tokens has been retroactively applied since 14th May 2018. In instances where the offered tokens consist of a mixture of investment tokens and tokens issued for alternate objectives, tax exemptions are applicable solely to the investment tokens. Crucially, the investment tokens must be discernibly demarcated from other tokens to warrant this tax exemption.

It is also pertinent to underline that a precedent has been set with a VAT exemption applicable to the trading of investment tokens in the authorized secondary market. This exemption has been in effect from 1st April 2022 to 31st December 2023, as established by the “Royal decree issued under the provisions of the Revenue Code Regarding Tax Exemption (No. 744), B.E. 2565.”

Effective Date and Rationale

This legislative amendment is endowed with a retrospective effect, becoming operational from 14th May 2018. The driving impetus behind the issuance of this Royal Decree is the recognition of digital investment tokens as vehicles for capital accumulation akin to traditional securities, subject to regulatory oversight. However, the transfer of digital tokens for investment purposes has hitherto been saddled with tax obligations. In line with the broader vision to stimulate investment within the economy and to fortify Thailand’s digital asset market, this measure seeks to alleviate the fiscal encumbrances attached to the transfer of digital tokens for investment objectives.

In summation, the aforementioned legal update ushers in a significant paradigm shift in the taxation landscape vis-à-vis investment token transfers. As a proactive step towards fostering investment and innovation in the burgeoning digital asset market, this legislative revision underscores Thailand’s commitment to incentivizing economic growth and promoting its digital economy aspirations.

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