Questions regarding Tax Exemption with Super Savers Funds

[dexpat]

Hello Guys,

I have been thinking about investing in the Super Savers Fund (SSF), primarily to avail the Tax Exemption.

 

However, it is my first time and I have so many questions.

Hope someone has tried it (or the earlier LTF) and answer some of my questions below.

 

1. How would one go about finding the best options? I see that all the Banks i am familiar with (namely SCB, KBank, and BBL) are offering some version of SSF, how would someone more experienced choose which bank to go with?
2. Given that we are in August 2020 now, is it still possible to avail this exemption for the year 2020?
3. Is it possible invest lets say 10K THB every month (rest of the year) and avail the incentive (of 50K) for the year 2020?
   • If is it possible, is it advised? or one should go big?
4. Once one invests (or buys units) should we advice our employer and deduct the tax amount at source? or expect to get a refund?
5. Given that it is announced for the period of 2020-2024, is it expected to continue after that? or 2024 is a hard limit?
6. And lastly, is it something worth looking into to potentially save 200K a year, being a foreigner?

 

I am sorry if there is a stupid questions in there, or if the entire thing is idiotic, but I am new at it and would love anyone experienced to pick out holes or blow this entire thing up for me.

 

How I am thinking about this is that I pay-up 200K (lump-sum, or installment: see questions 3) and get it back (maybe save it - i don't know how the refund works in this case: see questions 4) every year for at least 4 years (maybe more: see question 5) and then get my initial investment and potential gains (or losses) after 10 years.

 

Looking forward to hearing you thoughts.

 

Thanks for reading.

 

[YT3k72Em]

Haven't bought SSF but have LTF and RMF.

1. have to do your own research here. Compare the fees, how much is invested inside and outside Thailand, exchange rate risk etc. 

2. you can buy anytime of the year and it will count for that tax year. 1 Jan - 31 Dec. You will get a summary for the previous year from your bank around Jan, which you include in your tax return.

3. you can buy in one lump sum or spread it out as you like. the 10 years counts from when you buy each lot. When and how much you buy depends on how you feel, although considering you need to hold for 10 years, it probably wont make much difference.

4. you can ask them to do that if you want, otherwise you will get a refund.

5. up to the lawmakers, and the take-up, and success of the scheme. LTF was extended each year for a while until it was finally scrapped and replaced by SSF.

6. the value to you really depends on your marginal tax rate. if you are paying 30% tax, then you will get a return on investment of 30% in the first year (in the form of a tax refund). But then you have to hold it for another 9 years before you can sell to realise any capital gain. If you are paying 10% tax, then the return on investment is only 10% for the first year. One of the main downsides of Thai funds is their high fees in comparison to USA funds. The SSF may be around 1.8% a year, and the longer you hold it the more fees you'll end up paying.

 

https://www.tilleke.com/resources/tax-incentives-investment-thailand’s-super-savings-fund-scheme

 

Also look at your companies provident fund and RMF, as they may be a better deal.

[Satcommlee]

I read somewhere of a special (probably covid related) stimulus tax deduction if you invest 250K before a certain date, which does not affect your annual 250K tax deduction allowance under the new scheme as originally intended.  So if it is not too late you may still be able to funnel 500K away this year in SSF.

 

Last year I used the KDLTF scheme (max 500K), which incidentally has crashed by like 30% after covid.. But this scheme ended last year for tax deduction and was replaced with the SSF in which you can;t withdraw for 10 years or on your death.

 

RMF, I have not got my head around, I think there is a bit of a commitment involved (ie: you can;t pick and choose when and what you pay) to get the tax deduction. If you get it wrong you may end up paying 1.5% per month on the tax saving as a penalty, but again I am not sure.

Edited August 6, 2020 by Satcommlee

[YT3k72Em]

1 hour ago, Satcommlee said:

RMF, I have not got my head around, I think there is a bit of a commitment involved (ie: you can;t pick and choose when and what you pay) to get the tax deduction. If you get it wrong you may end up paying 1.5% per month on the tax saving as a penalty, but again I am not sure.

No RMF is basically like LTF except you can't sell until age 55 and must have held them for 5 years (from date of purchase). Also there is a requirement to buy every year (minimum 5000)  Also RMF can include foreign funds, so they haven't crashed as bad as the LTF which are 100% Thai.

[dexpat]

On 8/3/2020 at 4:29 PM, YT3k72Em said:

6. the value to you really depends on your marginal tax rate. if you are paying 30% tax, then you will get a return on investment of 30% in the first year (in the form of a tax refund). But then you have to hold it for another 9 years before you can sell to realise any capital gain. If you are paying 10% tax, then the return on investment is only 10% for the first year. One of the main downsides of Thai funds is their high fees in comparison to USA funds. The SSF may be around 1.8% a year, and the longer you hold it the more fees you'll end up paying.

Thanks @YT3k72Em

This clears up a big confusion for me. I was under the impression that the entire amount would be deducted from the "Tax", where as now what i understand is it will be deducted from "Taxable Income". So at 30% marginal tax rate, over the period of 4 years, one could save 100% and then make 20% over that.

I could be wrong with the numbers even now, but i get the idea.

@ 25% tax rate, one could get the entire amount back in 4 years, and then wait for the 10 years period to get the original principal and gains or losses.

 

A couple of questions on the execution part of this.

1. Is it just consumer banks that I should be looking into, or any other kind of financial institutions are better at it?
2. and what kind of fees (ballpark) would be a good deal?

 

Thanks so much for you clarification

[YT3k72Em]

11 hours ago, dexpat said:

Thanks @YT3k72Em

This clears up a big confusion for me. I was under the impression that the entire amount would be deducted from the "Tax", where as now what i understand is it will be deducted from "Taxable Income". So at 30% marginal tax rate, over the period of 4 years, one could save 100% and then make 20% over that.

I could be wrong with the numbers even now, but i get the idea.

@ 25% tax rate, one could get the entire amount back in 4 years, and then wait for the 10 years period to get the original principal and gains or losses.

 

A couple of questions on the execution part of this.

1. Is it just consumer banks that I should be looking into, or any other kind of financial institutions are better at it?
2. and what kind of fees (ballpark) would be a good deal?

 

Thanks so much for you clarification

Yes, it only reduces your Taxable income, not tax due, in the same way as claiming other things like life insurance or donations.

No, you can't claim the same money each year, you only get to claim it in the year that you bought it.  You have to buy more the next year if you want to claim again. 

Consumer banks are often agents for other finance companies so are a good place to start.

 

[dexpat]

On 8/7/2020 at 10:43 AM, YT3k72Em said:

No, you can't claim the same money each year, you only get to claim it in the year that you bought it.  You have to buy more the next year if you want to claim again.

Thanks so much, I was way off base.

This clears a lot of things for me, I am glad i asked.

 

I am going to start by talking to SCB and KBank.

 

Is there a discussion group, forum (here or elsewhere) that i could follow to get more insight?

 

Thanks for you help though, really appreciate it.