Personal income tax implications of cryptocurrency / digital tokens

Keywords: Mazars, Thailand, Tax, Personal income tax, Cryptocurrency, Digital token, Revenue Department, PND 90

8 March 2022

The guidelines cover the following topics:

1. Classifying income;
2. Calculating costs using two accounting methods – the first-in, first-out (FIFO) method or the moving average cost method; and
3. Measuring the value of the cryptocurrency / digital token, acquisition time, or average price on the date of acquisition to calculate personal income tax.

The guidelines are preliminary guidelines for filing the 2021 annual personal income tax return. The guidelines do not cover other taxes, such as withholding tax and VAT. 

Under the guidelines, the Revenue Department will impose personal income tax on benefits derived from cryptocurrency/digital tokens in the following cases:

1. Selling, transferring, or exchanging cryptocurrency/digital tokens
2. Mining cryptocurrency
3. Earning cryptocurrency as a salary or wage
4. Receiving cryptocurrency / digital tokens as a gift, reward, or prize
5. Earning benefits or compensation from holding cryptocurrency / digital tokens

1. Selling, transferring, or exchanging cryptocurrency / digital tokens

a. Type of income

A gain from the sale, transfer, or exchange of cryptocurrency/digital tokens is considered income under Section 40(4)(i) of the Revenue Code.

b. Method of calculating costs

Costs shall be calculated based on the type of coin using the following methods:

i. First-in, first-out method

The cryptocurrency / digital tokens which are purchased first will be sold first. 

ii. Moving average cost method

The cost of each type of cryptocurrency / digital token shall be determined by averaging the cost of the cryptocurrency / digital tokens at the beginning of the year and the cost of the cryptocurrency / digital tokens purchased during the year. This calculation must be made every time cryptocurrency / digital tokens are purchased.

Taxpayers can choose any calculation method. When a method is chosen, it must be used throughout the tax year. To change the calculation method the next year, taxpayers are not required to request and obtain approval from the Director-General of the Revenue Department. 

Costs shall include purchase costs and expenses for acquiring cryptocurrencies / digital tokens, such as acquisition fees, transfer fees, etc.

The calculation of both income and the cost of cryptocurrency / digital tokens shall use the value at the time of acquisition or the average price on the date of acquisition which is a reliable reference price, such as the price announced by the cryptocurrency / digital token exchange prepared in accordance with the rules of the Securities and Exchange Commission.

If there are losses arising from any type of cryptocurrencies / digital tokens in the same year, such losses can be offset against profits generated from any other type of cryptocurrencies / digital tokens. This applies only to transactions made through digital asset operators that are regulated by the Securities and Exchange Commission.

Cryptocurrency / digital tokens remaining at the end of the year shall not be considered assessable income subject to personal income tax. Their value shall be carried forward as a cost to the next tax year.

When filing annual personal income tax returns (Form PND 90), taxpayers can claim any withholding tax deducted during the tax year as a tax credit.

2. Mining cryptocurrency

a. Type of income

i. Cryptocurrency shall not be considered assessable income on the date it is acquired from mining. 

ii. When it is sold, transferred, or exchanged, its value after deducting expenses incurred which are necessary and reasonable will be considered assessable income under Section 40 (8) of the Revenue Code. 

iii. Miners are required to retain relevant documents and prepare accounts for costs actually incurred in the tax year, such as computer maintenance costs, employee wages, commission fees, electricity bills, internet costs, etc., including depreciation of assets, such as computers. 

iv. Expenses can be deducted in accordance with Section 8 bis of Royal Decree No. 11 regarding expenses allowed to be deducted from assessable income and Royal Decree No. 145 regarding the deduction of wear and tear and depreciation of assets.

b. Method of calculating costs

Costs shall be calculated based on the type of coin using the following methods:

i. First-in, first-out method

The cryptocurrency which are mined first will be sold first. 

ii. Moving average cost method

The cost of each type of cryptocurrency shall be determined by averaging the cost of the cryptocurrency at the beginning of the year and the cost of the cryptocurrency mined during the year.

Taxpayers can choose any calculation method. When a method is chosen, it must be used throughout the tax year. To change the calculation method the next year, taxpayers are not required to request and obtain approval from the Director-General of the Revenue Department.

The calculation of both income and the cost of cryptocurrency shall use the value at the time of acquisition or the average price on the date of acquisition which is a reliable reference price, such as the price announced by the cryptocurrency exchange prepared in accordance with the rules of the Securities and Exchange Commission.

3. Earning cryptocurrency as a salary or wage

a. Salaries paid to employees in cryptocurrencies are considered income from employment under Section 40 (1) of the Revenue Code.

b. Remuneration paid to contractors in cryptocurrencies is considered income from performing work under Section 40 (2) of the Revenue Code regardless of whether their duty, job, or work is performed on a temporary or regular basis.

c. If assessable income under Section 40 (1) and under Section 40 (2) are received from the same employer, they must both be declared in the annual personal income tax return as income under Section 40 (1).

d. The calculation of both income and the cost of cryptocurrency shall use the value at the time of acquisition or the average price on the date of acquisition which is a reliable reference price, such as the price announced by the cryptocurrency exchange prepared in accordance with the rules of the Securities and Exchange Commission. When a method is chosen, it must be used throughout the tax year.

e. When receiving cryptocurrency as a salary or wage, if tax has already been paid on the received value, the tax can be treated as a cost when calculating tax at the time of disposal of the cryptocurrency.

f. When filing annual personal income tax returns (Form PND 90), taxpayers can claim any withholding tax deducted during the tax year as a tax credit.

4. Receiving cryptocurrency / digital tokens as a gift, reward, or prize

a. Cryptocurrency / digital tokens may be given as a gift or reward when attending an event or as a promotional prize. This is considered assessable income under Section 40 (8) of the Revenue Code. 

b. The calculation of both income and the cost of cryptocurrency / digital tokens shall use the value at the time of acquisition or the average price on the date of acquisition which is a reliable reference price, such as the price announced by the cryptocurrency / digital token exchange prepared in accordance with the rules of the Securities and Exchange Commission. When a method is chosen, it must be used throughout the tax year.

c. When receiving cryptocurrency / digital tokens as a gift, reward, or prize, if tax has already been paid on the received value, the tax can be treated as a cost when calculating tax at the time of disposal of the cryptocurrency / digital tokens.

5. Earning benefits or compensation from holding cryptocurrency / digital tokens

a. This may apply when yield farming or staking. For digital tokens, this is considered assessable income under Section 40 (4) (h) of the Revenue Code. For cryptocurrency, this is considered assessable income under Section 40 (8) of the Revenue Code. 

b. The calculation of both income and the cost of cryptocurrency / digital tokens shall use the value at the time of acquisition or the average price on the date of acquisition which is a reliable reference price, such as the price announced by the cryptocurrency / digital token exchange prepared in accordance with the rules of the Securities and Exchange Commission. When a method is chosen, it must be used throughout the tax year.

c. When receiving cryptocurrency / digital tokens in such circumstances, if tax has already been paid on the received value, the tax can be treated as a cost when calculating tax at the time of disposal of the cryptocurrency/digital tokens.

General examples of personal income tax calculations for each instance mentioned above are provided in the guidelines. 

Reference: The Revenue Department