Tax deductions and returns: key investment options in Thailand
Shrewd investors actively seek opportunities that provide tax deductions while ensuring respectable returns. Within this context, three primary investment options demand consideration. These options comprise insurance, long-term funding, and savings through provident and social security fund contributions.
Investment choices are manifold. Social Security Fund, for instance, offers a tax deduction equivalent to the amount paid, capped at 9,000 baht per annum. Life insurance premiums allow deductions based on actual expenses up to 100,000 baht, provided the policy is with a Thai life insurance company and has a maturity of over ten years.
If the policy is forfeited before the end of the tenth year, the investment is non-deductible. Deductions for health and accident insurance premiums covering health are based on actual costs, up to 25,000 baht. The combined total with life and savings insurance premiums must not exceed 100,000 baht.
There are deductions for parents’ health insurance premiums based on actual expenses, capped at 15,000 baht. The parents’ annual income must not exceed 30,000 baht and their ages cannot exceed 60. Investments in social enterprises from 2021 offer a possible deduction of up to 100,000 baht.
Retirement Mutual Fund (RMF) deductions are based on the sum invested, limited to 30% of taxable income or a maximum of 500,000 baht. Investors must continue to invest in RMFs at least once annually, with breaks not exceeding one consecutive year, until they reach age 55. They also need to maintain their investment for no less than five years.
Super Savings Funds (SSF) incentivise long-term savings with deductions based on the sum invested, limited to 30% of taxable income or a maximum of 200,000 baht. SSF units must be held for ten years from the date of purchase, but continual yearly investment is not mandatory.
Provident Fund (PVD) annuity and Private School Teacher Welfare Fund (PSTWF) deductions are based on the sum invested, limited to 15% of taxable income, capped at 500,000 baht. Government Pension Fund (GPF) deductions are based on the sum invested, limited to 30% of taxable income, capped at 500,000 baht.
National Savings Fund (NSF) deductions are based on the sum invested, capped at 30,000 baht. For life insurance and retirement investments, including RMF, SSF, GPF, PVD, PSTWF, NSF, and pension life insurance, the combined tax deduction cannot exceed 500,000 baht.
The latest addition to the investment options is the Thailand ESG (TESG) Fund, a long-term investment fund proposed by the Finance Ministry that offers tax benefits for investors. The Securities and Exchange Commission (SEC) is expected to approve TESG Funds by early December, allowing investors to deduct their investment in them for the 2023 tax year.
Deductions for TESG Funds are based on the amount invested, with a limit of 30% of taxable income, up to 100,000 baht, for the tax year the investment is made. Investors must hold the TESG Fund for a minimum of eight years. The capital gains or returns obtained from the redemption of TESG investment units are tax-exempt if the investment meets Revenue Department conditions.
Phillip Securities suggests four themes for long-term investments for RMF, SSF, and TESG funds, including clean energy, health business, technology, and foreign debt funds. Each theme comes with its unique characteristics and risk factors, reported Bangkok Post.
According to Morningstar Thailand, the top 10 RMFs in terms of returns for the year-to-date, as of Nov 28, are as follows:
- Asset Plus Digital Blockchain RMF (ASP-DIGIBLOCRMF) 100%
- Tisco Next Generation Internet RMF P (TNEXTGENRMF) 61.9%
- Tisco Next Generation Internet RMF A (TNEXTGENRMF-A) 61.9%
- Mega 10 Retirement Mutual Fund (MEGA 10 RMF) 51.3%
- Krungsri Global Technology Equity RMF (KFGTECHRMF) 44.9%
- Tisco Technology Equity RMF-P (TTECHRMF-P) 44.2%
- Tisco Technology Equity RMF-A (TTECHRMF-A) 44.2%
- KKP Expanded Tech RMF – Hedged (KKP TECH RMF-H) 44.0%
- SCB US Equity NDQ RMF (Acc) (SCBRMNDQ-A) 39.0%
- TMB Eastspring Global Innovation RMF (TMB-ES-GINNO-RMF) 35.8%
