The Revenue Department is preparing a tax framework for G-Tokens similar to the taxation of interest income, aiming for fair competition with traditional investments.
According to Pinsai Suraswadi, director-general of the department, it is drafting a departmental announcement for cabinet approval regarding the taxation of G-Tokens.
The Public Debt Management Office (PDMO) is preparing to issue G-Tokens in the near future.
He said the taxation of G-Tokens will be based on the principle of tax neutrality, meaning income of the same type must be taxed at the same rate.
For G-Tokens, the income earned by holders is considered interest income, making it subject to a 15% withholding tax by the Revenue Department.
Taxpayers may choose to treat it as a final tax or include it in their annual personal income tax filing, he said.
Mr Pinsai said G-Tokens are similar in nature to a government bond, which pays interest to its holders. Therefore, it must be taxed at the same rate as interest income, even though it takes the form of a token rather than a traditional bond issued by the PDMO.
He emphasised that the current tax policy of the Revenue Department follows the principle of "substance over form".
For example, in the case of the G-Token, while its form is a token, its substance is that of a debt instrument. As such, it is taxed like a debt instrument -- subject to a 15% withholding tax.
If the form were instead a share or equity instrument, then it would be taxed accordingly as an equity instrument -- typically exempt from tax when traded on the market.
He noted that in the past, substance and form were generally aligned, but today innovation has brought changes that can cause the form and substance to differ -- as in the case of the G-Token.
According to Mr Pinsai, in the future, new forms of financial instruments may emerge. The Revenue Department has two approaches it can take: one is to apply a standardised tax policy without considering the instrument's origin; the other is to evaluate the underlying substance of the instrument.
For example, G-Tokens are regarded as debt instruments, so they are subject to a 15% tax, which is considered final.
If tokens are issued as equity instruments, the matter would need to be reviewed by the Revenue Department.
Should the tokens be classified as equity and qualify for tax exemptions when traded on the market, then those exemptions would also be honoured, he added.
G-Tokens represent a new channel through which the PDMO borrows money from the public to cover budget deficits.
Traditionally, the PDMO issues promissory notes, treasury bills or government bonds. Now, the PDMO will issue digital tokens to individuals who lend money to the government.
Buying G-Tokens is essentially similar to buying familiar government savings bonds. The first issuance is expected in July, with a target amount of around 5 billion baht.
Purchasing and trading G-Tokens will be possible through various mobile applications, such as Krungthai Bank's Pao Tang app.
The PDMO expects the product will be popular among younger people or first-time jobbers, as they tend to be more familiar with mobile apps than older generations.