Cryptocurrency taxation guidelines released
HLB Thailand Tax Team
On 31 January 2022 the Thai Revenue Department released a comprehensive guide for individual taxpayers on the taxation of cryptocurrencies and digital tokens.
The 32-page guide deals with personal income tax only and does not cover other tax issues such as withholding tax, VAT, etc.
The main points covered by the guide are:
- Clarification on the characterisation of income derived from cryptocurrencies and digital tokens and the tax treatment of such income.
- Calculation of the cost base of cryptocurrencies/digital tokens, using either the moving average cost method or the first-in, first-out (FIFO) method. The same method must be used to calculate costs throughout the tax year but the method may be changed in the next tax year.
- Valuation of cryptocurrencies and digital tokens for calculating income or the cost of investment.
The following is a summary of the salient points covered in the guide.
Sale of cryptocurrencies
In case of the sale, payment, transfer or exchange of cryptocurrencies/digital tokens to or with another person, the value derived exceeding the cost of investment is assessable income under Section 40 (4) (i) of the Revenue Code.
The cost base of cryptocurrencies/digital tokens shall be calculated using a standard accounting method, such as the FIFO method or moving average cost method and the costs shall be identified separately for each type of coin.
The FIFO method is a calculation of the cost of each type of cryptocurrency/digital token, whereby the cryptocurrencies/digital tokens purchased first are treated as sold first, respectively. As a result, the remaining cryptocurrencies/digital tokens at the end of the day are the latest cryptocurrencies/digital tokens purchased.
The moving average cost method is a calculation of the cost of each type of cryptocurrency/digital token, based on the average cost of the cryptocurrencies/digital tokens at the beginning of the year and the cost of cryptocurrencies/digital tokens purchased during the year, re-calculated after every purchase.
The same method must be used to calculate costs throughout the tax year.
The cost base includes the purchase price and expenses such as fees and transfer costs.
Cryptocurrency/digital token valuations for calculating costs and revenues shall be based on the value at the time of acquisition or the average price on the date of acquisition, using a reliable reference price, such as the price announced by an exchange established in accordance with the rules of the Office of the Securities and Exchange Commission, Thailand, etc.
Losses arising from one type of cryptocurrency/digital token can be offset against the profit arising from other types of cryptocurrencies/digital tokens, but only for transactions that are conducted through digital asset operators under the supervision of the Office of the Securities and Exchange Commission, Thailand.
The cost value of the cryptocurrencies/digital tokens held at the end of the year is not assessable income and shall be carried forward to the next tax year.
Withholding tax deducted during the tax year can be used as a tax credit when filing a personal income tax return.
Cryptocurrency Mining
The receipt of cryptocurrencies from mining is not considered assessable income at the time of receipt.
The sale, payment, transfer or exchange of mined cryptocurrencies is considered assessable income under section 40(8) of the Revenue Code.
Necessary and reasonable expenses can be deducted but the miner must keep relevant documentary evidence and cost accounting records. Such expenses would include computer maintenance costs, employee wages, commissions, electricity costs and internet costs actually incurred in the tax year, and depreciation of assets such as computers, calculated in accordance with the Revenue Code.
The rules for calculating the cost of cryptocurrencies/digital tokens and their valuation are the same as those described above.
