By Tossaporn Kiattidamrongkul, Associate Director
On 8 December 2023, the Thai Cabinet approved a tax exemption for those wishing to invest in Thai Environmental, social and corporate governance (“ESG”) and the Minister of finance issued Ministerial Regulation No. 390 in respect of a tax exemption for tax measures to promote investment for sustainability in Thailand. Subsequently, the Revenue Department issued the Notification of Director-General on Income Tax No. 442 in respect of income tax exemption for purchasing investment units in Thai Mutual Funds for Sustainability on 20 December 2023 as detailed below:
The Environment Social Governance (“Thai ESG”) fund, which is a Thai mutual fund for sustainability, provides special rights for investors to use the investment amount as a tax deduction for personal income tax purposes. This is the same as investing in a Retirement Mutual Fund (“RMF”), Super Savings Fund (“SSF”), Super Savings Fund Extra (“SSFX”) or Long-Term Equity Fund (“LTF”) that came out previously and which has been covered a number of times by RSM Thailand Tax Advisors in our RSM Focus newsletters.
Thai ESG funds are tax deductible up to a maximum of 30% of annual taxable income and a maximum investment of not more than 100,000 baht with no minimum investment specified and it can be used for tax allowances for the tax years 2023 to 2032 (period of purchasing is from 21 November 2023 to 31 December 2032). Thai ESG's investment limit will not be counted with other retirement savings funds e.g. RMF, SSF, provident fund, etc. which is a very attractive proposition for investors wishing to minimize their taxes.
The Investment period of Thai ESG is a full 8 years from the date of purchase. For example, if Thai ESG is bought on 22 December 2023, the date when it can be sold will be 22 December 2031. Thai ESG funds can be bought in any year and investors will get a tax deduction for that year. It is not mandatory to purchase continuously every year.
In the event of failure to comply with the condition, income earners must pay taxes in the year in which the tax allowance of Thai ESG is used by adding back the deduction and pay additional tax in that tax year together with a surcharge from the date of filing in that tax year until the date of filing the additional personal income tax returns (PND.91/90). However, the Revenue Department has the right to assess taxes within 5 years from the date of purchase of the fund only. In addition, if there are capital gains from the sale of Thai ESG due to the breach of the condition, the income earners must also pay taxes in the year in which capital gains arise. This practice is the same as for the other funds e.g. RMF, LTF, SSF, etc.