High-end tax breaks

By now, people have filed file their income tax returns for the year ending 2007.

For this year, the new government has quietly given Thai taxpayers, particular those in the uppermost 37.5-per-cent marginal-income brackets, a bonus if they purchased long-term mutual funds.

John Cifor, a tax partner at financial advisory and consulting firm Deloitte Touche Tohmatsu Jaiyos, said the government had upped the maximum amount a taxpayer could deduct from purchasing long-term equity funds (LTFs) and retirement mutual funds (RMFs), up to Bt1 million per annum.

"The maximum annual deductible amount has been increased from Bt300,000 per year to Bt500,000 per year each for retirement mutual funds and long-term equity funds," he said.

However, mutual-fund buyers seeking the Bt1-million deduc-tion are subject to a maximum

15-per-cent of gross income deduction.

"In other words, you must earn Bt6.7 million to claim the Bt1-million deduction," Cifor said.

The increased limitations are specifically aimed at investments in Thai mutual funds and should greatly help Thai fund industry and ultimately increase the Stock Exchange of Thailand's overall value.

To qualify for the tax deduction, the investments must remain in the specific fund for set periods. Cifor said investors seeking to take advantage of the tax breaks could invest in two types of funds: RMFs and LTFs that invest in listed stocks.

"The retirement mutual fund is an investment vehicle designed to promote retirement savings through tax incentives as provided by the government's policy," he said.

The RMF is suitable for investors who desire to save for retirement, especially those who do not have other retirement savings plans, such as government pension funds or employer provident funds.

"Remember, the tax deduc-

tion for RMFs is still subject

to a 15-per-cent limitation [up

to a maximum of Bt500,000

per annum] on income. That 15-per-cent limitation must also include whatever a person has paid into a provident fund," he said.

Ultimately, taxpayers can withdraw these funds tax-free from RMFs when they reach 55.

"Investors should check with their tax advisers for other

conditions that must be met," he said.

This year, taxpayers can also receive a deduction of up to Bt500,000 by investing in an LTF.

"Again, taxpayers should

check with their tax advisers, because they must continuous-

ly invest a minimum amount in these funds each year," he said.

For many high-income locals, these tax-deductible funds are almost an investment "no-brainer".

For instance, if they are in a 37.5-per-cent marginal tax bracket (taxable income of Bt4 million plus), the government is essentially allowing them to purchase Bt1,000 in mutual funds for Bt635.

      At a glance

n Thai taxpayers, particular those in the uppermost 37.5-per-cent marginal-income brackets, get a bonus if they purchased long-term mutual funds.

n A taxpayer could deduct from purchasing long-term equity funds and retirement mutual funds, up to Bt1 million per annum.

n Mutual-fund buyers seeking the Bt1-million deduction are subject to a maximum 15-per-cent of gross income deduction.

n To qualify for the tax deduction, the investments must remain in the specific fund for set periods.