The Revenue Department has rebuffed a request by digital asset operators to scrap a tax-collecting agency's plan to impose a 15% withholding tax on capital gains and returns from putting money into such assets.
The 15% withholding tax for digital asset trades is appropriate because the Revenue Department does not want to support retail investors trading in such assets, said Prasong Poontaneat, director-general of the department and the designated permanent secretary for finance.
His comment came after digital asset associations and operators submitted a letter to Deputy Prime Minister Somkid Jatusripitak asking the government to rethink the enforcement of a royal decree to regulate digital asset transactions -- particularly the withholding tax, as it could be an obstacle to startup fund-raising.
Finance Minister Apisak Tantivorawong told the associations the law was necessary, Mr Prasong said.
The royal decree is expected to take effect soon after winning the Council of State's endorsement, he said.
The law is aimed at protecting retail investors from losses in trading digital assets and preventing such assets from being used for money laundering, he said.
Investors who make digital-asset-related trades will be liable for a 7% value-added tax (VAT) payment from the trading fee, on top of the 15% withholding tax on capital gains and returns from such investments, when the new law is enforced.
The bill narrows the definition of digital assets to cryptocurrencies and digital tokens, removing other potential asset classes such as electronic data, as specified by the ministry in a previous draft.
Mr Prasong said the law requires initial coin offering (ICO) issuers to comply with Know Your Customer (KYC) practice, which lets authorities identify fund-raisers who must remit to the Revenue Department.
The 15% withholding tax on digital asset transactions is charged at the same rate as interest tax, he said, adding that authorities are not worried about claims that Singapore offers a more attractive tax climate than Thailand and that fund-raisers could flee to the city-state.
An informed source at the Finance Ministry said the Securities and Exchange Commission will issue organic law to supervise digital assets after the royal decree is enforced.