LTF & Provident Fund.

[corkman]

Dear All,

So LTF tax breaks will end in 2016. I assume that means I can pay 500k in this year (2015), and 500k (2016) next year to get the tax rebate (so the final rebate will be in 2017).

Is this correct, or is it the vase that I can open a fund any time in 2016, and continue to enjoy tax breaks for 5 years after that? I am assuming not, but TIT - some things are lost in translation.

Does the same apply to provident funds? Currently I enjoy the tax benefits of a company, in addition to the benefits of an LTF. Will this provident fund benefit continue? My understanding is that this is NOT an RMF and so I can cash it in any time after 5 years.

Thanks in advance.

[fletchsmile]

When you invest in an LTF or RMF you came claim it as a deduction/allowance in your tax calc for the year in which you invest. The 500k is an allowance each year.

To get the tax benefit you can either ask your company/ HR to adjust your salary during the year, or claim it back after the year end.

If LTFs are discontinued after 2016, you would therefore be able to claim a deduction for tax year 2015 if you pay in, and tax 2016 if you pay in again. After that you would not be able to claim any tax relief for 2017.

Provident funds are basically company run pension schemes. Again you can pay up to 500k into one each year and claim a deduction.

RMFs are mutual funds, as are LTFs. They are a private arrangements.

The total deduction of provident fund + RMFs in any year combined cannot exceed the lower of 15% of your income or 500k.

LTF is a separate allowance of the lower of 15% of your income or 500k per year. So altogether each year the max allowance would be 1mio: 500k in LTF and 500k combined total in RMF+providebt fund. You can actually pay in as much as you like into LTFs just that you can only get tax relief on 500k max

Cheers

Fletch

[regedit]

How does it work when you sell the LTFs ? Understand you need to hold them for 5 years to be a tax free gain, so does the broker send you the gross remittance and it's left to you to declare them on the annual tax return if you'd held them for less than 5 years, no declaration if held for over 5 years, or is the control at the broker level ? Thanks.

[fletchsmile]

For Thai tax, if you pick a non-dividend paying LTF fund, i.e accumulation units, once you claim your tax relief for the year you invested there is nothing further to do providing you keep it for the term. There's no capital gains tax. When you sell you'll get a contract note you've sold and the proceeds a few days later. Nothing to report to the Thai tax authorities on sale.

If you selected a dividend paying fund, there is also no capital gains tax and nothing to report for Thai tax when you sell. The only thing you may need to report is the dividends. Here you have 2 choices:

1) ask for a flat rate of 10% to be deducted. Then you have no need to include the dividend on your annual tax return. Just keep the paperwork in case the revenue ever ask

2) ask for no tax to be deducted and then you are taxed at your marginal rate of tax. Here you include it as income on your tax return and in the income calculation. If you have little or no Thai income your marginal rate would be zero.

So logically choose accumulation units/ a fund that doesn't pay a div, and you don't need to do anything once you get your tax back. Choosing a dividend fund may put you at a tax disadvantage compared to a non-dividend fund. The only reason for choosing one is simplicity of collecting dividends instead of having to sell a few units.

This is only Thailand though. The extent you may be liable for tax in other countries will depend on your personal status. There's another thread running at the moment on the implications on US tax of mutual funds bought in Thailand for US nationals.

Cheers

Fletch