Investment in gold has long been regarded as a hedge against economic uncertainty, particularly during periods of heightened volatility. Yet gold is increasingly being used as a means of converting grey money into legitimate money, raising concerns about its broader impact on the country’s economy and society.
As a result, regulatory oversight aimed at tracking the origin and destination of gold held by individuals, whether the funds involved are legitimate, grey or illicit, has become a focus of government monitoring.
The Bank of Thailand previously required transactions involving gold purchases made through applications to be reported when their value exceeded 10 million baht or 2kg. This measure resulted in a 70% decline in unusual transactions in this category.
However, such measures may be insufficient. Central bank governor Vitai Ratanakorn and Finance Minister Ekniti Nitithanprapas recently discussed introducing a transaction tax on gold trading. The Finance Ministry said the purpose of the tax was not to generate revenue, but rather to enable authorities to more effectively track who is buying and selling gold to whom.
Mr Vitai said if a tax were imposed on gold transactions, it could be set at a very low rate, such as 0.01% of the value of the gold transaction. For a transaction value of 70,000 baht, the tax would amount to just 7 baht.
What are the current taxes related to gold?
When an individual purchases gold from a traditional gold shop for personal savings or collection, rather than for commercial purposes, any subsequent sale of the gold is exempt from personal income tax. There is also no value-added tax (VAT) liability arising from the purchase and sale of the gold itself.
If gold is purchased for speculative purposes, such as through an app on a regular basis with the intention of systematically profiting from gold trading, the Revenue Department may determine that the activity does not constitute personal investment or collection. Income derived from such gold trading would be considered assessable under the law, meaning the resulting profits must be included in the calculation of income tax.
However, the making charge or the goldsmith’s fee on gold jewellery remains subject to VAT.
For investments such as gold futures or digital gold, profits earned from the investment are considered assessable income.
When will the gold transaction tax be introduced?
Policymakers believe Thailand may need to tax gold transactions to prevent money laundering. However, technocrats who translate policy into measures remain hesitant, concerned that such a levy could affect the domestic gold trade.
The current priority is to establish a regulatory framework for gold trading that prevents it from becoming a channel for money laundering. The Fiscal Policy Office (FPO) and the central bank are expected to jointly draft legislation governing both online and offline gold trading.
A digital system would be used to track gold trading data, providing authorities with up-to-date information more quickly.
Gold market supervision remains subject to two limitations: the absence of a dedicated regulatory authority, and limited access to comprehensive data on gold trading activities.
Although the Anti-Money Laundering Office (Amlo) oversees cash transactions, gold trading involves more complex dimensions than cash transactions alone.
How was gold trading regulated in the past?
According to a 1997 study by Thailand Development Research Institute focused on gold trading liberalisation, gold bullion trading in Thailand was once subject to strict government controls as part of wartime measures.
The Exchange Control Act of 1942 empowered the finance minister to issue laws and regulations governing the international movement of currency and the cross-border movement of gold. That same year, the ministry issued the Royal Decree Controlling the Export of Certain Goods Outside the Kingdom (No.8), which prohibited the export of gold, platinum, gems and precious stones from the country without special permission from the finance minister or a person designated by the minister.
When World War II ended in 1945, demand for gold bullion surged amid post-war inflationary pressures and concerns over the baht’s stability.
Restrictions on gold trading meant only certain businesses were permitted to import gold. For example, in 1952 the Finance Ministry granted exclusive import rights to Saha Thanikit Co, led by Bangkok Bank’s founder, Chin Sophonpanich, making the company an authorised gold importer.
Gold import tariffs were previously as high as 35%, before gradually falling to 5% in 1991 and then to 0% in 1992. The combination of high tariffs and a limited number of authorised importers drove a portion of the gold trade underground.
The reduction in gold import tariffs prompted the Finance Ministry to later liberalise gold imports, moving away from the previous system in which imports were monopolised by a small number of authorised importers.
In 1991, the FPO issued a notification on rules, procedures and conditions for registration as an importer or exporter, allowing private companies to import gold bullion, subject to three conditions.
Registration is required, with the FPO approving the criteria, procedures and conditions as proposed by the finance minister. Registered importers and exporters were required to present their registration documents to customs officials each time they imported or exported gold. The registration licence is valid for a maximum of three years.
Each gold importer is required to specify the quantity of gold it plans to import. The actual quantity imported cannot be less than the prescribed level, effectively establishing a minimum import requirement, forming part of the ministry’s policy to promote the expansion of the gold jewellery industry.
In addition, importers were required to submit monthly reports to the FPO specifying the dates and quantities of all cross-border transactions. The office reserved the right to revoke a registration if the licence holder failed to comply with the conditions and requirements of registration.