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By Lien Hoang
Thailand is preparing a decree to exempt some cryptocurrency trading from value added tax, signaling a more moderate approach than other governments in Asia that have banned the new technology or not regulated it at all.
Fans of digital tokens have griped about a potential tax since May 10, when Bangkok published two royal decrees greenlighting the Revenue Department to collect levies on the trading of virtual currencies, like bitcoin. The law establishes a tax of 15 percent on dividends and capital gains.
However, the tax agency will issue rules in about a week to clarify that another tax, the VAT of 7 percent, will not apply to retail traders, an official in the agency’s legal affairs division told Bloomberg Tax June 13.
Areeya Ananworaraks, tax director at SCL Tax Consultants in Bangkok, said the VAT break on digital assets should ease the workload for both taxpayers and collectors.
Authorities hope “to encourage the crypto market to be expanded in Thailand, but under control by the government,” she told Bloomberg Tax.
The military-ruled kingdom’s tax changes underscore the balancing act for policymakers who want to keep pace with innovation, but also fight tax evasion, computer hacking, and other tech-enabled crime.
Last month Thai Deputy Prime Minister Wissanu Krea-ngam warned of related risks like money laundering and drug trafficking, the government’s National News Bureau of Thailand reported. But he also welcomed the possible benefits that are offered by digital currencies, such as funding for startups.
Jonathan Blaine, tax director at accounting firm DFDL in Bangkok, said that waiving VAT could lead to more cryptocurrency trading.
“I think it will make a difference of a sort in that, from a general perspective, the absence of taxation on transactions tends to encourage participation in those transactions,” he told Bloomberg Tax.
The twin decrees finalized in May served to add two categories of assessable income to Thailand’s tax code. Those who trade or own digital currencies are subject to a duty of 15 percent when they either 1) receive a share of profits on the coins, or 2) sell their coins for more than they paid for them.
Aside from buying bitcoin to pay for goods online or to bet that the value will rise, more investors are looking at virtual currencies because of initial coin offerings, or ICOs. Similar to an initial public offering, ICOs allow companies to raise capital by coding and selling their own e-coins, rather than selling stocks.
The Thai decrees help lay a tax foundation for ICOs, but officials are also wary of scammers latching onto this financial fad by inventing tokens just to make a quick baht.
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