The association expects the SEC to respond to the suggestion in about two months, its president Maris Tarab said yesterday.

Currently, property funds can be structured into two types - leasehold and freehold.

While the former can be structured in several formats, in the end the underlying asset belongs to the original asset owner. Investors receive the capital and returns regularly, in keeping with the claims in each fund's prospectus.

In a freehold fund, the underlying asset belongs to the unit-holders when the fund matures. It is then up to the fund manager whether to sell the asset. By this method, investors may receive an extra gain from the asset appreciation over time.

For leasehold funds, investors have to pay withholding tax for the amount of money they receive periodically, that is, the capital investment and the return.

Maris said the proposal submitted to the SEC requested that it waive the withholding tax for the capital investment. "Now, some investors are confused. They may wonder why they don't receive the capital investment when the fund matures. So, we asked the SEC to allow the fund to clearly separate the capital investment and returns. And, when the unit-holder receives the capital investment, they should not be taxed for that."

Maris added that if approved, the regulation would be effective for only new launches and not apply retroactively to existing funds.

Kasikorn Asset Management, which listed its first property fund - the Gold Fund - on the Stock Exchange of Thailand yesterday, presented a proposal asking the SEC to allow the fund to pay only returns and keep the capital until the fund matures.

Among the 14 property funds in the market, only MFC Asset Management's Nichada Thani fund is of the freehold type.

Piyarat Setthasiriphaiboon

The Nation