The world nowadays can be easily connected just by the use of our fingers via the internet. The world of finance and investment is thereby connected by such. As cryptocurrency rises in popularity, it has become a hotspot of investment. Before one gets into the realm of cryptocurrency investment, tax is a major element that one must not miss. In Thailand, the element of tax was announced earlier this year to impose a 15% tax rate on profits from cryptocurrency investments.
According to the Royal Decree on Amendment to the Revenue Code, new measures were initiated to exact a tax on Blockchain income. Which contains details as follows.
· 15% Withholding Tax (WHT), a deduction from payments made to suppliers who provide a service, must be deducted from the receipt of Crypto income.
Which obliges cryptocurrency buyers to collect the tax from the profit gained by the sellers in every transaction.
· 0-35% rates of personal income Tax (PIT), a direct tax levied on income of a person, must be deducted from income derived, earned, or received from Crypto between January & December of the tax year.
The taxation on Cryptocurrency transaction also stated in two sub-categories of income under section 40 (4) of the Thai Revenue Code
· 40(4)(h) share of profits or other benefits derived from holding Digital Asset.
· 40(4)(i) realized gains derived from the transfer of Digital Asset.
Individual taxpayers will also be required to include such income as assessable income upon submission of their annual personal income tax (PIT) returns with the 15% WHT remitted being creditable against final tax owed.
Furthermore, Cryptocurrencies that are converted, used in exchange for goods and services, or exchanged will be considered as taxable affairs. For example, Cryptocurrencies that are converted into FIAT, a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it, or exchanged against others will be considered as taxable affair as well.
Advantages and Disadvantages of the Law
Nowadays, there are no apparent advantages or disadvantages regarding tax imposition on cryptocurrency. However, there is a dilemma on the legal implications of Thai tax law. In other words, we could not find a suitable and efficient practice of being subject to Personal Income tax. Under the ThaiRevenue Code, an assessable income is stated in Section 39 with other benefits or properties under Section 40. All of those are subject to Tax liability. The interesting issue in this scenario is that an income from a business, commerce, agriculture, industry, transport, or any other activity is not specified in (1)- (7). In the case of cryptocurrency, there are many transactions holding and transferring cryptocurrency as an investment in which the gain from such activity is considered capital gain and holding and transferring cryptocurrency as business, such as mining and trading in the ordinary course of business. However, according to the emergency Decree Amending the Revenue Code (No.19) B.E.2561, succinctly, the specific income derived from the transfer of cryptocurrency is subject to a tax liability which is Section 40(4)(i) rather than being subject to tax liability under Section 40(8) as the general application of legal rules. This may cause inconsistency because they have more burden than normal situations since different types of income result in different tax deduction rates, which can alter the amount of taxable income. The income under underSection 40 (4) cannot be deducted, whereas in Section 40 (8), usually, a taxpayer can select which type he/she prefers to deduct; standard deduction for 60% or deduction for necessary and reasonable expenses. In order to resolve this issue, there must be an apparent commentary in addition to Section 40(4)(i) in regards to its applicability to the benefits derived from the business or employment in the context of cryptocurrency.
Moreover, it is still vague about the tax calculation on the value basis, gain or loss, and mined cryptocurrencies. There should be a more concrete legal framework on those issues that all taxpayers would acknowledge their responsibilities, and this may reduce tax evasion as well. In other words, the cryptocurrencies must be converted into flat value calculable for the tax liability. According to The Emergency Decree on the Digital Asset Business B.E. 2561, Section 8 still does not state the particular procedure for standard exchange rate approach from crypto to Thai Baht. Compared to other countries, for instance, the United States uses the fair market value of the cryptocurrency at the time of receipt to convert its value into U.S dollars. Until now, the Revenue Department shall regulated the fair market value.
Nevertheless, the Revenue Department still relied on the online exchange rate approved by the Securities and Exchanges Commission, such asBitkub.com. Therefore, the solution would be that the Revenue Department must have its establishment on the exchange rate to enhance self-assessment and concrete practice towards the Emergency Decree. On the other hand, mined cryptocurrencies are not recognized directly under the Thai Revenue Code. In general, according to legal scholars, it should be an assessable income under Section 40(8) that is not compatible with any kinds of other assessable income. Moreover, it is still a debatable issue whether deriving taxpayer income from mining is subject to twice tax liability or not. In other words, such mining may be exchanged into some properties, money, or any other benefits, which may be subject to other kinds of assessable income under Section 40. Therefore, the necessary information must be provided. If it were legally possible, there must be a specific act or law regarding “Tax liability on Crypto-Currencies” separately enacted. The reason is that the Revenue Code itself is amended annually, and this may cause inconsistencies in the application. Disadvantageously, the one who gained loss will be the revenue reduction of the Revenue Department.
Other Countries’ Equivalent
1. the United States
Mostly all cryptocurrency transactions are taxed in the USA and must be declared. For tax reasons, the Internal Revenue Service (IRS) views cryptocurrencies to be property, and investors must pay taxes on the difference between the buy and sale price. A profit on assets kept for less than a year is a short-term gain, which is subject to regular marginal tax rates ranging from 10% to 37% in 2021. Moreover, depending on income, currency held for more than a year may be eligible for lower long-term capital gains rates of 0%,15%, or 20%. While purchasing currency is not a taxable event, changing it to cash or another coin, using it to purchase goods and services, obtaining paid for labour, and other activities can result in levies.
2. Hong Kong
Cryptocurrencies are regarded as "virtual commodities" by Hong Kong's Money Authority (HKMA), not as officially recognised currencies. There is no capital gains tax in Hong Kong. Investors who profitably purchase and sell financial investments do not have to pay taxes on the sales. Nevertheless, because frequent crypto trading is considered a "regular course of business," it is liable to income tax, also known as profits tax, in Hong Kong (16.5 percent cap). The Inland RevenueDepartment (IRD), which is in charge of tax collection, categorizes crypto assets into categories: payment tokens, security tokens, or utility tokens.
Cryptocurrencyprofits earned through investing and trading are tax-free capital gains for qualifying individuals. Income from professional trading and mining, on the other hand, is taxed. Importantly, tax regulations vary by location, and an annual "wealth tax" is imposed on an individual's total cryptocurrency holdings, as well as the remainder of his net assets. Furthermore, crypto companies still have to report their profits and are taxed.
After the Revenue Department announced its cryptocurrency tax imposition plan shortly after the New Year, it did not take long for cryptocurrency investors to comment on it. Because cryptocurrency taxation is based on individual transactions, investors are still subject to the taxation even though they are not gaining any profit overall. This sparks the narrative that cryptocurrency investment might not be worth it.
In various cryptocurrency blogs, groups, and platforms in Thailand, people have been showing resentment towards the cryptocurrency taxation and, to a certain extent, the Revenue Department itself. With 15per cent tax based on individual profit, investors feel extremely dissatisfied. This is because, firstly, having 15 percent of their profits taken aways seems like a total rip-off in the perspective of the investors. Secondly, even if people are willing to pay 15 percent tax, they do not feel comfortable with the way the RevenueDepartment handles the State’s income. This public dissatisfaction leads to many public figures to comment on such a controversy. “We’d like to hear more from [investors] such that we'll be able to bring [their] concerns to the relevant authority,” Jirayut Srupsrisopa, CEO ofBitkub, a Thailand-based cryptocurrency exchange platform, said, “the [cryptocurrency profit taxrates] at 1.5, 2.5,or 5 percent or whatnot also seems to be good figures for investors.” This indicates that the issues arising from the RevenueDepartment’s taxation have given rise to large-scale concerns amongst investors and entrepreneurs alike, and even politicians. To many, 15 percent is too much and is going to bleed them dry.
On 13 January 2022, as criticisms, comments, and concerns become widespread, the Revenue Department has taken the people’s opinion into consideration. The Department promises to work closely with the Thai Digital Assets Association to listen to the public in order to find a solution to these issues. Whether the Revenue Departmentdecreases the tax rates, the investors will have to wait.
As the plans of taxation became widely opposed, it is no doubt that the Revenue Department will reconsider it. Whatever the outcome might be, it is still a duty for investors to declare their profits in order to be taxed regardless of the rates. Nonetheless, with or without the tax imposition at the rate of 15%, cryptocurrency investment will continue to grow in Thailand.
Adriana Hamacher and Stephen Graves, '11 Countries That Don't Tax Bitcoin Gains' (Decrypt 13 September 2021) <https://decrypt.co/43513/countries-that-dont-tax-bitcoin-gains> accessed 15 January 2022.
BE LAWS, 'What are the taxes on Cryptocurrency in Thailand and do I need to pay tax?'
<https://www.belaws.com/thailand/taxes-cryptocurrency-thailand/> accessed 12 January 2022.
BE LAWS, 'Taxes on crypto in Thailand' <https://www.belaws.com/thailand/legal-corporate-accounting/legal/blockchain-expertise/blockchain-taxes/> accessed 12 January 2022.
DFDL, 'Thailand Legal ad Tax Alert: Regulatory Hash - Thailand's Cryptocurrency Law Comes Into Effect' <https://www.dfdl.com/resources/legal-and-tax-updates/thailand-legal-and-tax-alert-regulatory-hash-thailands-cryptocurrency-law-comes-into-effect/> accessed 14 January 2022.
HKWJ, 'Crypto Tax Regulatory Around the World' (October 20 2021) <www.hkwj-taxlaw.hk/crypto-tax/> accessed 14 January 2022.
Internal Revenue Code (IRC) 1986,s 46
International Revenue Service, ‘Notice 2014-21’ (IRS.gov, 2014) accessed 22 April
James Chen, 'Fiat Monet' (Investopedia 26 October 2021) <https://www.investopedia.com/terms/f/fiatmoney.asp> accessed 14 January 2022.
Kate Dore, '4 year-end moves to slash your cryptocurrency tax bill' (CNBC 20 November 2021) <https://www.cnbc.com/2021/11/20/4-year-end-moves-to-slash-your-cryptocurrency-tax-bill.html> accessed 14 January 2022.
Punnarat Pirisomboon, THE IMPOSITION OF TAX ON CRYPTOCURRENCIES
(2019) P. 294
Thai Revenue Code, Section 40(8), Section 40(4)(I)
The Revenue Department, 'Personal Income Tax' (23 November 2020)<https://www.rd.go.th/english/6045.html> accessed 13 January 2022.
Wichit Chantanusornsiri and Nuntawun Polkuamdee, 'Crypto tax collection changes considered' (Bangkok Post, 7 January 2022 ) <https://www.bangkokpost.com/business/2243379/crypto-tax-collection-changes-considered> accessed 13 January 2022.
Werner Vermaak, 'Where Are the World's Crypto Tax Havens in 2021' (Alexandria) <https://coinmarketcap.com/alexandria/article/where-are-the-worlds-crypto-tax-havens-in-2021> accessed 15 January 2022.
'สรุปข้อสังเกต "ท็อป จิรายุส" กับ ประเด็น "เก็บภาษีคริปโทฯ
" ในไทย' (กรงเทพธุรกิจ 10 มกราคม 2565) <https://www.bangkokbiznews.com/business/981835> สืบค้นเมื่อ 15 มกราคม 2565.
'เฟ้นปมร้อนเก็บภาษีคริปโทฯ กรมสรรพากรรับข้อเสนอ' (ประชาชาติธุรกิจ 14 มกราคม 2565) <https://www.prachachat.net/ict/news-842644> สืบค้นเมื่อ 15 มกราคม 2565.
Photo by Art Rachen, on Unsplash