New law aims to promote investment through trusts | Bangkok Post: business

TAX CORNER

In an attempt to promote the use of a trust under the Trust for Transactions in Capital Market Act B.E. 2550 (2007) (''Trust Act'') as a new investment vehicle in the stock market, the Thai cabinet approved an executive decree to grant certain tax incentives. Now, the decree has become effective and it is time for us to examine what has been offered to the investors so far.

First of all, let's have a glance on what a trust looks like. Under the Trust Act, a trust is deemed established where a deed is executed and a trustor transfers assets to a trustee, who is appointed to manage the assets for the benefits of beneficiaries. The term ''trust'' refers to the assets managed by the trustee, which is either a bank or a security company that fulfils qualifications set out by the Securities and Exchange Commission (SEC). Both the trustor and the trustee could also be a beneficiary with the limited proportion of interest.

Currently, trusts are allowed only for some particular purposes as announced by the SEC such as real estate investment trusts (REITs), institutional investor and high net worth trust fund, trusts for employees' stock option plans (ESOPs) and trusts for issuance of derivatives. Assets that can be managed by a trustee could be securities, as is the case for ESOPs, as well as other assets, as is the case for REITs. Though the features of a trust resemble that of a mutual fund, the rules applicable to the trust are more relaxing in respect of the funding source and the qualifications of the trustee.