The regulations, laws, and taxation within the cryptocurrency domain are confusing all around the world. Nevertheless, governments have been cleaning up, in an effort to tax gains from the cryptocurrency bonanza. 2018 in particular, has so far been a year in which governments are prioritizing cryptocurrency taxation. Recently, Thailand jumped into the fray, announcing that its government is enacting a cryptocurrency tax framework. Investors trading in cryptocurrency will now have to pay 7% VAT (Value Added Tax) in addition to a 15% capital gains tax.
- The 7% value added tax will be applicable on all cryptocurrency-related trades.
- The 15% capital gains will be applied to returns on investment from cryptocurrency holdings.
Thai Finance Minister Announces the Tax Framework
Apisak Tantivorawong, the Finance Minister of Thailand revealed the cryptocurrency taxation framework after a weekly cabinet meeting. earlier in February 2018, Bank of Thailand attempted to eliminate the loopholes in the cryptocurrency market by simply banning all cryptocurrency transactions while Thailand’s Ministry of Finance worked on a capital gain tax on all virtual currencies.
Measures by both Finance Minister and Bank of Thailand were designed to curb tax evasion and criminal activities. Korn Chatikavanij, a former finance minister and chairman of the Thai fintech Association told the Nikkei Asian Review. Nevertheless, enforcement will be challenging.
Cryptocurrency Use Rises in Thailand, Benefits Stay Abroad
Thailand appears to be a place in which cryptocurrency markets have been developing quite quickly. The involvement of startups that accept virtual currency payments and ICOs launching from the country to raise funds have grown. However, the lack of clear regulatory framework by Thai regulators has left startups registering their platforms and ICOs in Singapore, one of the preferred jurisdictions to launch ICOs.
For instance, a Thai-South Korean joint venture called Six.network is registered in Singapore. It is a decentralized financial service platform, which has announced a token sale in Bangkok on Mar 27 to raise $44 million. However, one of the co-founders, Natavudh Pungecharoenpong noted that the startup is working with SEC office.
Thai Start-Ups Launching from Singapore and Switzerland
The company has already approached Thai regulatory authorities to clarify how to comply with local laws and to ensure transparency. In addition, another startup, JFin also listed regulatory uncertainties as the reason to postpone its listing from early April to early May. Lack of regulatory clarity in Thailand could keep on forcing lucrative start-ups to register in places like Singapore & Switzerland.
Taxation and the Regulatory Environment in the Region
There are several countries getting in on the cryptocurrency revolution with which Thailand must now compete. Vincent Ha of Six.network states; “Many countries in the region, including Vietnam, are crypto-crazy. You can see a lot of ICOs coming out, but they have to go around government regulations, just as in Indonesia”. This means that Thailand, with its new cryptocurrency taxation schemes and its lack of regulatory clarity regarding ICOs, could keep on losing its start-ups to other countries where regulation is friendlier, and taxation is less hefty.