Investors are worried about their tax liability and the method of calculation after the Revenue Department issued on January 31 tax guidelines for individuals engaging in crypto and digital token activities.
Thais and expats (subject to double-taxation agreements) are required to file annual personal income tax returns by March 31 based on their income earned in the previous year.
The tax handbook is the result of extensive discussions between revenue officials and representatives from the crypto community who had strongly objected to levying capital gains tax on crypto investment.
The Revenue Department has made some concessions to investors’ demands, including allowing the investment cost to be deducted from the sales amount and scrapping the mandatory 15 percent withholding tax if the trading is via licensed digital asset exchanges.
Trading in digital assets has been booming over the past two years. From a modest 170,000 investors in early 2020, the number has shot up close to 2 million currently with a daily trade volume of Bt4.8 billion on average, up from Bt240 million less than two years ago.
Ekniti Nitithanprapas, director-general of the Revenue Department, said the department does not consider crypto tax as a major source of revenue but it will serve the purpose of justice in the whole tax system.
Five activities covered
The tax will cover five sources of gains: sales or exchange of digital assets, crypto mining, receiving crypto as wages, getting digital assets as gifts or rewards, and benefits or investment returns from holding crypto and digital tokens.
Gains from buying and selling digital assets are treated as assessable income under the Revenue Code’s Section 40(4).
Investors who buy and sell the asset are allowed to have tax deductions—expenses that taxpayers incur during the year. They could choose either “first-in-first-out (FIFO)” or “Moving Average Cost” for calculating the value.
Whichever method is chosen, it must be persisted with for the entire tax year.
Under FIFO, for example, if in February last year Mr. A had bought 10 crypto coins at Bt20 each, the total investment cost would be Bt200. If he bought 5 more coins in June at Bt8 each, that would cost Bt40. If he sells 10 coins at Bt30 each, his total revenue would be Bt300. In this case, his investment cost was Bt200, so he made a profit of Bt100.
Taking the example further, if in October he bought 15 more coins at Bt9 each, that would be a total cost of Bt135.
In November, if he sold 16 coins, each for Bt10, he would realize total revenue of Bt160. His investment cost would be tabulated as follows: Bt40 (cost of previous 5 coins) plus Bt99 (11 new coins at Bt9 each). Therefore, his total investment cost would be Bt139, while the sales amount was Bt160, giving him a profit of Bt21. His outstanding investment at the end of 2021 was: Bt36 (4 coins at Bt9 each).
Mr. A has a duty to pay tax on his Bt121 (100+21) taxable income. The outstanding 4 coins will not be counted as last year’s income.
Moving average cost method
The 4 outstanding coins, bought at Bt9 each, costing Bt36 would be transferred to the next tax year. Suppose Mr. A buys 10 new coins at Bt16 each, costing Bt160 in January, then the average price of his coins would be averaged at Bt14 each – the total cost of his holdings divided by the total number of coins.
Later in the same month, if he sells 12 coins at Bt17 each for total sales of Bt204, then under the Moving Average Cost method his investment cost totaled 12 coins at Bt14 each – Bt168. So he made a profit of Bt36. The formula for Moving Average Cost is (4×9) + (10+16)/ (4+10) for each coin.
Exchange of digital assets
Tax is levied on gains derived from digital assets being exchanged for digital assets. Gains are treated as assessable income under the Revenue Code’s Section 40(4).
If two investors exchange their digital assets, they would be valued in fiat money, which is the baht, and if their investment cost is lower than their selling price, then they have to pay tax on the difference.
Those who run Bitcoin mining and receive the coins are not yet subject to tax.
The tax laws will be applied when those coins are sold or exchanged for other digital assets. Gains derived from this activity are categorized under the Revenue Code’s Section 40(8).
Miners are allowed to have tax deductions — expenses such as rent, electricity bill, the investment cost of computer hardware and software, internet fee, wages or brokerage payments. Miners could choose either FIFO or Moving Average Cost to calculate their investment cost.
Crypto holders should refer to the reference prices declared by digital exchanges under the supervision of the Securities and Exchange Commission on the same day they receive or exchange their digital assets.
Crypto as salary, wages, fee, commission
Those who receive crypto for their employment, such as salary, wage or payment for their work performance like fee and commission, are treated as assessable income subject to personal income tax, according to the Revenue Code’s Section 40(1) and 40(2).
Investment cost and income would be calculated on the receiving day, or average prices on that day in line with prices declared by digital asset exchanges. Tax paid will be counted as an investment cost when the holder sells those coins. Taxpayers will have tax credit on withholding tax paid during the year.
Crypto and digital token as gift, reward
Crypto gifts and rewards are treated as assessable income under the Revenue Code’s Section 40(8). The value of those digital assets will be determined on the receiving day, or average prices on that day in line with prices declared by digital asset exchanges. Tax paid will be counted as an investment cost when the holder sells those coins.
Benefits and returns
Gains, such as “yield farming” or “staking” derived from holding “digital tokens”, are treated as income under Section 40(4). The value of those digital assets will be determined on the receiving day, or the average price on that day in line with prices declared by digital exchanges. Tax paid will be counted as an investment cost when holders sell those tokens.
Gains such as “yield farming” and “staking” derived from holding “crypto” are treated as income under Section 40(8). The value of those cryptocurrencies will be determined on receiving day, or average prices on that day in line with prices declared by digital exchanges. Tax paid will be counted as an investment cost when the holder sells those cryptocurrencies.
Rumblings of discontent
“I don’t agree with the levying of tax on crypto received as gift, reward, and tax on gains including staking derived from holding crypto. It is unfair to investors and crypto collectors,” said Nan, an investor who did not reveal his real name.
He suggested that digital exchanges should provide some support to investors. “For example, their App should have a function that helps investors save transaction information,” he said.
Some investors who follow the Facebook page of Poramin Insom, founder of Stang Corp which operates Stang Pro, one of the digital exchanges, expressed frustration about the tax calculation method.
Meanwhile, Akalarp Yimwilai, co-founder of Zipmex, a digital exchange, said the exchange has no role in tax payment. “It is the business of investors. The Revenue Department has not asked for anything from us,” he added.