Personal Income Tax Exemption from the Income Derived from Digital Investment Token Dividends
The Royal Decree recently introduced by the Thai government marks a pivotal moment in the country’s economic landscape. Aimed at fostering growth in the digital asset industry, this Royal Decree grants personal income tax exemption to individuals deriving income from dividends earned through holding investment digital tokens. Let’s move into the details of this significant development.
Background and Rationale
Digital Tokens and Traditional Securities:
The emergence of digital tokens has blurred the lines between traditional securities and modern investment vehicles. By extending tax benefits to investment digital tokens, Thailand seeks to create a level playing field and encourage investor participation.
Tax Treatment of Traditional Securities:
Under existing Thai law, investors in traditional securities can exclude dividend income from their taxable income. A withholding tax rate of 10% already applies to these dividends. Investors may voluntarily include dividends in their taxable income for various financial planning reasons.
The Proposed Royal Decree:
The Royal Decree extends the same principle to investment digital tokens. However, the withholding tax rate for these tokens is set slightly higher at 15%.
This adjustment strikes a balance between incentivizing investment and maintaining tax revenue.
Key Provisions
Entity Covered and Conditions:
The Royal Decree applies to individuals who earn income from profits or other similar benefits as a result of holding or possessing investment digital tokens which withholding tax at the rate of 15% has already been deducted from such income. There is no need to include such income to calculate tax payment at the end of fiscal year. However, taxpayers must not request for a tax refund or credit, either in whole or in part.
Effective Date:
Income generated from 1 January 2024 will fall under the purview of this draft Royal Decree.
Implications and Conclusion
Harmonization of Tax Policies:
The Royal Decree bridges the gap between traditional securities and digital tokens. Clarity in taxation policies also fosters investor confidence.
Attractiveness as an Investment Destination:
By providing incentives and exemptions, Thailand aims to enhance its allure as a hub for digital asset investments.
In summary, the Royal Decree represents a significant stride towards a balanced taxation framework—supporting both investors and the digital asset ecosystem. As Thailand embraces the age of digital investment, this move underscores the nation’s commitment to innovation and economic growth.
Author: Panisa Suwanmatajarn, Managing Partner.
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