Re­tire­ment Mu­tual Funds ( RMFS) and Long Term Eq­uity Funds ( LTF) – LTF Tax Priv­i­leges Re­vised

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: Peggy Crev­el­ing and Chad Crev­el­ing

For many em­ployed ex­pats in Thai­land, Thai Long Term Eq­uity Funds ( LTFS) and Re­tire­ment Mu­tual Funds ( RMFS) can pro­vide worth­while Thai tax ben­e­fits. This ar­ti­cle dis­cusses the mer­its of both types of in­vest­ments, and high­lights an im­por­tant 2016 change to LTF hold­ing pe­riod. For a pe­riod of time U. S. cit­i­zens were un­able to in­vest in LTFS and RMFS due to FATCA leg­is­la­tion, how­ever, some Thai as­set man­age­ment com­pa­nies are again ac­cept­ing U. S. cit­i­zens.


Long- Term Eq­uity Funds ( LTFS) were set up un­der Thai­land’s IMF pro­gram to en­cour­age longer- term in­vest­ing in the Thai eq­uity mar­ket. Re­tire­ment Mu­tual Funds ( RMFS) were es­tab­lished to en­cour­age peo­ple to save for re­tire­ment by pro­vid­ing Thai tax ben­e­fits on sav­ings.

Both LTFS and RMFS pro­vide cur­rent- year Thai tax de­duc­tions on con­tri­bu­tions, and earn­ings grow free of Thai tax. Sub­ject to meeting LTF and RMF fund re­quire­ments, funds can also be with­drawn tax free. There are a num­ber of dif­fer­ent LTFS and RMFS man­aged by the var­i­ous Thai as­set man­age­ment com­pa­nies and dis­trib­uted ei­ther di­rectly or through af­fil­i­ated bank branch net­works.


For RMFS, in­di­vid­u­als can deduct con­tri­bu­tions of up to 15% of their per­sonal in­come ( in­clud­ing salary, bonus, fees, com­mis­sions, sev­er­ance pay, or in­vest­ment in­come) or Baht 500,000 per year ( which­ever is lower) from cur­rent Thai tax­able in­come. If you have a prov­i­dent fund at work, the to­tal an­nual max­i­mum tax de­duc­tion for both the prov­i­dent fund and the RMF to­gether is Baht 500,000.

For LTFS, in­di­vid­u­als can deduct con­tri­bu­tions of up to 15% of an­nual com­pen­sa­tion or Baht 500,000 ( which­ever is lower) from cur­rent- year tax­able in­come. This is in ad­di­tion to any con­tri­bu­tions made to a prov­i­dent fund and/ or RMF.

For high- in­come earn­ers, com­bined con­tri­bu­tions can to­tal Baht 1 mil­lion ( about USD 28,000) and save Baht 350,000 in Thai taxes ( about USD 10,000).



• You get a cur­rent- year Thai tax de­duc­tion on con­tri­bu­tions. • Depend­ing on the fund’s pol­icy, the fund man­ager may in­vest in eq­uity funds ( Thai as well as in­ter­na­tional), debt in­stru­ments, or mixed funds. • Re­turns grow free of Thai tax. • The max­i­mum an­nual con­tri­bu­tion is the lesser of 15% of to­tal an­nual com­pen­sa­tion or Baht 500,000. • If you con­trib­ute to a com­pany prov­i­dent fund, the to­tal con­tri­bu­tion to both the prov­i­dent fund and RMF can­not ex­ceed Baht 500,000. • Con­tri­bu­tions need to be recorded be­fore the end of the cal­en­dar year. • Funds can be with­drawn free of Thai tax af­ter age 55 ( and if held for five years or more) • To qual­ify for Thai tax ben­e­fits, you must con­trib­ute at least ev­ery other year for a min­i­mum of five years. The min­i­mum con­tri­bu­tion is 3% of tax­able com­pen­sa­tion or Baht 5,000, which­ever is lower. • If you fail to meet the re­quired min­i­mum con­tri­bu­tion sched­ule or with­draw funds prior to reach­ing age 55, or have not met the five- year hold­ing re­quire­ment, you will have to pay back any tax de­duc­tion you re­ceived along with penalty fees. In ad­di­tion, any cap­i­tal gains will be sub­ject to a 10% tax. • Since 2015, the tax ben­e­fits of em­ployer Thai Prov­i­dent Funds can be pre­served by trans­fer­ring to RMFS af­ter em­ploy­ment ends


• You get a cur­rent- year Thai tax de­duc­tion on con­tri­bu­tions. • Un­like RMFS, LTFS in­vest pri­mar­ily in Thai­land- listed stocks. You’ll there­fore want to make sure a Thai- only eq­uity hold­ing makes sense in your di­ver­si­fied port­fo­lio. • Re­turns grow free of Thai tax. • The max­i­mum an­nual con­tri­bu­tion is the lesser 15% of to­tal an­nual com­pen­sa­tion or Baht 500,000. • Con­tri­bu­tions can be made in ad­di­tion to those made to prov­i­dent funds and RMFS. • There is no need to make on­go­ing con­tri­bu­tions to main­tain tax ben­e­fits. • Change in 2016: New LTF con­tri­bu­tions and earn­ings can be with­drawn free of Thai tax af­ter seven cal­en­dar years. This is an in­crease from the pre­vi­ous hold­ing pe­riod of five cal­en­dar years. Ef­fec­tively, 2016 LTF con­tri­bu­tions must be main­tained for five years and two days. Any­one con­tribut­ing to an LTF on the last busi­ness day of 2016 would need to main­tain the in­vest­ment un­til the first busi­ness day of 2022. • If you with­draw be­fore the hold­ing pe­riod, any tax de­duc­tions you re­ceived will need to be paid back along with penalty fees. In ad­di­tion, any cap­i­tal

gains will be sub­ject to a 10% tax. • Con­tri­bu­tions must be recorded by the end of the cal­en­dar year.

The rules re­gard­ing LTF and RMF con­tri­bu­tions can and do change, so make sure you check the cur­rent sta­tus be­fore mak­ing any con­tri­bu­tions.


Aside from Thai cit­i­zens, many for­eign­ers with a long- term com­mit­ment to Thai­land through work, mar­riage, or life­style can ben­e­fit from con­tribut­ing to LTFS and RMFS. Those on short- term ex­pat as­sign­ments in Thai­land will have to care­fully weigh the po­ten­tial ben­e­fits against the var­i­ous rules and reg­u­la­tions re­quired to main­tain the tax- ex­empt sta­tus of each fund.


Re­cently some Thai as­set man­age­ment com­pa­nies have re­opened their RMF and LTF pro­grams to U. S. cit­i­zens. Amer­i­cans are taxed on world­wide earn­ings and com­pen­sa­tion, how­ever, so be­fore in­vest­ing, U. S. cit­i­zens should note that the tax- ad­van­taged sta­tus of the RMF and LTF is not rec­og­nized by the IRS. Ad­di­tion­ally, both LTFS and RMFS are likely to be con­sid­ered Pas­sive For­eign In­vest­ment Com­pa­nies ( PFICS) by the IRS with their earn­ings sub­ject to spe­cial tax rules and fil­ing re­quire­ments.

Nev­er­the­less, RMFS and LTFS may still make sense for some Amer­i­cans, es­pe­cially those whose com­pen­sa­tion does not ex­ceed the For­eign Earned In­come Ex­clu­sion ( FEIE - $ 101,300 in 2016) and hous­ing de­duc­tion. For th­ese Amer­i­cans all Thai- earned salary would be shielded from U. S. tax al­ready.

Con­tri­bu­tions to LTFS and RMFS would save Thai tax and there­fore lower the over­all tax bur­den. Even though in­vest­ment earn­ings may be re­ported an­nu­ally un­der PFIC rules, the Thai tax sav­ings could still make this a worth­while trade- off. If you earn in ex­cess of the FEIE and hous­ing de­duc­tion, con­tri­bu­tions could still make sense, but the ben­e­fit di­min­ishes as you en­ter the higher U. S. tax brack­ets. Com­pen­sa­tion in ex­cess of the FEIE and hous­ing de­duc­tion will ef­fec­tively be taxed over­all at the higher of the U. S. or Thai rate. For some­one in the 35% tax bracket in Thai­land and the 33% or higher U. S. brack­ets, the Thai tax sav­ings may not jus­tify ty­ing up the funds in an LTF or RMF and fil­ing Form 8621 ( PFIC).

For some­one in the 35 % Thai tax bracket, but only in the 28% U. S. tax bracket, con­tri­bu­tions could make sense - but you’ll need to do the math to de­ter­mine your over­all ( Thai + U. S.) tax sav­ings.

Peggy Crev­el­ing, CFA is Ex­ec­u­tive Di­rec­tor and Chad Crev­el­ing, CFA is Man­ag­ing Di­rec­tor of Crev­el­ing & Crev­el­ing Pri­vate Wealth Ad­vi­sory. They can be con­tacted at peggy@crev­elin­gand­crev­el­ and chad@crev­elin­gand­crev­el­

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