Rmf And Ltf

[Debothai]

I have been told by my work colleauges to do the RMF and the LTF in order to avoid paying so much tax. I talked to a bank guy and he says there is not much benefit in doing it...I would like to know:

1. What are these things?

2. Can a foreigner do them?

3. Do they really reduce your tax payments?

4. When is the best time to do them?

thanks

[Daveroc]

LTF and RMF are mutual funds products that invest in various areas such equities, bonds etc. The government currently allows a deduction of up to 500k or 15%, whichever is the lower, of income against your earnings. The impact of this is that if you are on a tax rate of 37% this is an automatic return regardless of the performance of the fund that you invest in.

Funds must remain invested for 5 years. Many people invest in December as this counts as the first calender year. Withdrawal can be arranged once the five years are completed on the basis of first in first out. With RMF you must reach a minimum age of 55 before withdrawal. investments can be made in limp sums or drip fed through the year.

A number of organisation provide these funds. i attach a link to BBL.

http://www.bangkokbank.com/Bangkok%20Bank/Personal%20Banking/Investments%20and%20Fixed/Mutual%20Funds/LTF/Pages/default.aspx

These investments are worth looking at dependent on ones circumstances. They are not restricted to Thai Nationals. The returns in recent years have been good. However past returns are not indicative of future performance. On the up side you do get the tax advantage that can offset a bad performing year

[Kalbo]

If you're working in Thailand, (and obviously paying tax), then it would be beneficial to buy into an LTF just for the tax breaks.

Best time to buy would be at the end of the year, although at this moment in time (january), the point would seem a bit moot.

1. They are long term investment funds (or retirement mutual funds).

2. Yes, a foreigner can buy them

3. Yes, they really do reduce your tax payments

4. Anytime really, but best timing would be at the end of the year.

One problem I have found is that in most bank branches, (inner city Bangkok included) is that most staff don't have a <deleted>' clue about them, making information difficult to come by. So I found the required info on the net and studied up myself. Personally, Kasikorn seemed to have better options, followed closely by Bangkok bank, but that is just my opinion is not a recomendation.

Good luck

[Lazy Sod]

I've had an LTF with Aberdeen here for a few years - it's worthwhile especially if you are in the higher tax bracket.

http://www.aberdeen-asset.co.th/aam.nsf/Thailand/fundinformationhistoricalprices

[chiangmaibruce]

As this issue of LTF and RMF get raised reasonably often here, this introductory info in the ING Funds web site might be of interest to some folks:

http://www.ingfunds.co.th/EN/GettingStarted_RMFLTF.asp

[fletchsmile]

Good summary by Daveroc.

I think Long Term Equity Funds (LTFs) are great and one of the best equity based investments I've ever found globally, not just Thailand. I believe if you want to stay in Thailand long term then building some Thai assets is an excellent idea for most people. Yes there are risks and your capital is not guaranteed. I've done them every year I've been working in Thailand since when they first came out in around 2004. In that time with tax factored in, I've very rarely been in a loss position on them (even in the recent crises), and at the worst flat.

Returns have generally been in double digits per annum, over 5 years even without the tax. Though past performance is no guarantee of the future. I hold Aberdeen LTF, ING Good Governance LTF and ING Big Cap Div LTF.

I used to put an equal amount in each month Jan - Oct. I like baht cost averaging so you're not timing the market. I would then fill in a form and speak to HR so that I got my tax credited to my salary in Nov and Dec. This also made some nice extra cash for Xmas. eg at top tax rate = 50k a month for 10 months then get back 37% extra on 500k in a pay packet spread over 2 months. An extra THB 93 / 94k in each of your Nov and Dec salaries - totalling 187,500 free.

The Thai stock market tends to go up in Dec statistically more than down. Thai people often seem to go for a big one off just before year end so they can minimise the time invested. I prefer not to do that, as 1) you're picking a high month statistically, 2) for equity based long term investments I like to hold them exactly that - long term and not get in and out quick.

On Retirement Mutual Funds (RMFs) as an expat I'm not a fan. You still get the tax relief in the same way, and most of the benefits of the LTF. However, you're tied in until 55 years of age. Life is too uncertain for many expats in my view. Why tie your money up inflexibly until 55, plus you might not even be in Thailand, or in worst case not even alive then. 5 years for an LTF is a reasonable compromise for the benefits but not in my view until you're 55 as in RMF. Unless for RMFs you are 45-50-ish years old for an expat.

One advantage of RMF over LTF tho' is range of investment. LTF are Thai based equities and some bonds. RMF can also be these,, or overseas equities or gold funds etc.

LTFs have helped put me in a position where early retirement (before 55 in this life) is an option in Thailand. Very difficult to find this good for LTFs elsewhere in the world. RMFs tie you in until 55, like pensions in many parts of the world, which can be a hassle if you seek financial freedom at an early age.

Cheers

Fletch

Edited February 2, 2012 by fletchsmile