In a bid to bolster its fiscal resources for a proposed economic stimulus, Thailand’s Revenue Department has unveiled a more stringent tax regime, targeting foreign earnings derived from cryptocurrency trading. This move seeks to close a previously exploited loophole that permitted overseas income to flow into the country without incurring taxation.
The initiative comes as part of Thailand’s multifaceted efforts to stimulate its national economy, epitomised by the recent introduction of the “digital wallet” scheme. This programme, unveiled just last month, carries an estimated price tag of 560 billion baht, with a mission to rejuvenate economic activities within the nation.
These new tax regulations have been meticulously crafted, with three distinct categories in the crosshairs, as elucidated by legal experts. The targets encompass Thai residents actively engaged in foreign stock markets through overseas brokerages, cryptocurrency traders, and individuals, both domestic and foreign, residing in Thailand for over 180 days annually.
Additionally, the policy aims squarely at individuals who have previously exploited a tax loophole that allowed them to repatriate foreign earnings into Thailand without incurring taxes, provided these funds had been held in an offshore account for more than a calendar year.
This groundbreaking rule is poised to come into effect on January 1, 2024, with Thai authorities poised to begin taxing foreign income starting from the year 2025.
In a significant departure from the prior taxation framework, Thailand had previously levied taxes on foreign income residents only when those funds were remitted into Thailand during the same fiscal year in which they were earned.
Reflecting on the implications of the new regulation, an unnamed source within the Thai Finance Ministry affirmed, “The principle of tax is that you must pay tax on income you earn from abroad no matter how you earn it and regardless of the tax year in which the money is earned.”
However, as Thailand takes this bold step, there are concerns about its potential ramifications on foreign investment. The report suggests that this crypto tax legislation might deter foreign investors, particularly private bankers, who could perceive the regulatory environment in Thailand as increasingly uncertain.
Furthermore, it is posited that this policy shift could exacerbate income inequality within Thailand. According to a Rural Income Diagnostic report released by the World Bank, Thailand possesses the highest income inequality rate in the East Asia and Pacific region, with an income Gini index of 43.3% in 2019.
While these guidelines aim to boost revenue by curtailing tax evasion, they could also introduce complexities for businesses and potentially impact foreign direct investments, raising questions about the overall economic landscape in Thailand.