The Emergency Decree on the Digital Asset Businesses B.E. 2561 (2018) (the “EDDAB”) was published in the Government Gazette on 13 May 2018 with effect from 14 May 2018. Simultaneously, the Thai Government enacted the Emergency Decree on the Amendment to the Revenue Code B.E. 2561 (2018) with the objective of imposing levies on income derived from Digital Asset transactions.
The publication of the two Decrees represents Thailand’s first attempt to regulate Digital Asset/cryptocurrencies. While the EDDAB has been issued, the regulatory process is still in nascence as the Thai crypto framework requires the issuance of subordinated regulations to be issued by the Ministry of Finance and the Securities and Exchange Commission to provide more detailed guidance and procedures on the principles outlined in the EDDAB.
Rationale for the Enactment of the EDDAB:
The Government of Thailand has enacted the Emergency Decree in response to:
- Concerns that Digital Asset related activities can potentially affect Thailand’s financial stability, economic system and community;
- The growing recognition and appetite for Digital Asset by the Thai community as being utilized as fund-raising instruments, medium of exchange, and trading on Digital Asset exchanges; and
- Investor protection concerns given the highly speculative nature of Digital Asset and the potential risk of illegal transactions.
Who is the Regulator:
The key authority under the EDDAB is the Minister of Finance who is empowered to issue ministerial regulations and appoint competent officers to perform duties under the EDDAB.
Under the EDDAB, certain responsibilities have also been issued to the Securities and Exchange Commission to issue subordinated regulations and determine exemptions to what Digital Asset are under its purview.
What Activities are being regulated:
The EDDAB regulates the following activities:
(i) Offering of newly issued digital tokens to the public
(ii) Digital Asset Businesses, particularly: (a) Digital Asset Exchanges; (b) Digital Asset Brokers; and (c) Digital Asset Dealers.
In addition to specific regulation of Digital Asset Businesses, the EDDAB provides guidance on:
- The various types of Digital Asset subject to the EDDAB by classifying “Digital Asset” into three categories.
- The prevention of unfair trading practices akin to those provided for under the Securities and Exchange Act B.E. 2535[1] (the “Securities and Exchange Act”).
- Anti-money laundering and terrorist financing principles to be complied with by Digital Asset Businesses.
Penalties:
A contravention of failure to comply with the EDDAB is subject to criminal and civil sanctions, comparable to those under the Securities and Exchange Act.
Compliance Timeline:
The issuance of the Emergency Decree triggers the 90 day registration period for existing Digital Asset business operators who are required to register their business and activities with the Securities and Exchange Commission (SEC), i.e. by the 14th of August, 2018 (which coincidentally is also the last date for registrations and applications per the recently enacted Payment Systems Act, B.E 2560). Such operators will be able to continue their business operations unless specifically ordered to stop by the SEC.
Taxation Implications:
The second Decree, Emergency Decree on the Amendment to the Revenue Code B.E. 2561 (2018), amends the Thai Revenue Code (TRC) and imposes a 15% withholding tax (WHT) on income derived from Digital Asset.
Section 3 of the Emergency Decree also inserts two sub-categories of income under Section 40 (4) of the TRC. These two new sub-categories concern income derived from Digital Asset:
- 40(4)(h) share of profits or other benefits derived from holding Digital Asset; and
- 40(4)(i) realized gains derived from the transfer of Digital Asset.
Individual taxpayers will also be required to include such income as assessable income upon submission of their annual personal income tax (PIT) returns with the 15% WHT remitted being creditable against final tax owed.
Although the Emergency Decree does not expressly discuss the application of WHT on payments made to a non-resident company, a 15% WHT should be automatically imposed under Section 70 of the TRC. This is due to Section 70 requiring the payer of income to deduct 15% WHT on income under Section 40 (2) – (6) paid to a non-resident company that is not conducting business activities in Thailand.
How can we help:
Should you have concerns that your business may be classified as a “Digital Asset Business” and subject to the newly imposed taxation scheme or are contemplating issuance of an ICO or simply looking for more clarity on Thailand’s cryptocurrency framework, please do not hesitate to contact us.
DFDL Contacts
Partner
Director – Tax
Senior Manager – Tax
Regional Legal Adviser
Legal Adviser
The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
[1] Sections 38-50 of the RDDAB.
