The cabinet has approved Super Savings Funds as a new tax-saving fund to replace long-term equity funds (LTFs), for which the tax incentive is due to lapse at year-end.
The ceiling contribution entitled to a personal income tax deduction will rise to 30% of annual accessible income, not exceeding 200,000 baht, for the savings fund, said Finance Minister Uttama Savanayana.
The tax-deductible amount is capped at 500,000 baht per year when combined contributions to the new tax-saving fund are added to retirement mutual funds (RMFs), provident funds, the Government Pension Fund, the National Savings Fund and pension insurance premiums.
The lock-up period for contributions to Super Savings Funds is 10 calendar years, longer than LTFs' seven years.
Individual taxpayers are now allowed to deduct up to 15% of accessible income, or a maximum of 500,000 baht a year, whichever is lower, for contribution to LTFs.
They are also permitted to separately deduct contributions to RMFs worth up to 500,000 baht but no more than 15% of accessible income. The 500,000-baht RMF contribution cap must include contributions to provident funds and pension insurance.
There is no minimum contribution requirement for Super Savings Funds, and individual taxpayers are not required to make continuous contributions to the new fund.
Super Savings Funds are allowed to invest in all kinds of securities, Mr Uttama said.
Tax perks for contributions to the funds will last for five years through 2024.
People can still invest in LTFs after this year, but their contribution is no longer entitled to a personal income tax deduction.
The Finance Ministry believes that tax refunds for contributions to Super Savings Funds will differ little from those for LTFs, Mr Uttama said.
He said the new funds are meant to encourage long-term savings, with middle- and low-income earners benefiting the most.
In related news, the cabinet tweaked the tax incentive criteria for RMFs by doubling the percentage of contributions to the fund to 30% of accessible income but keeping the maximum amount unchanged at 500,000 baht per tax year.
The minimum contribution requirement to RMFs of 3% of accessible income or at least 5,000 baht is scrapped to enable middle- and low-income earners to make contributions to the funds. The requirement for continuous investment with a prohibition of stopping contributions for more than one year remains unchanged.
Ruenvadee Suwanmongkol, secretary-general of the Securities and Exchange Commission, said Super Savings Funds are expected to be ready for subscription from Feb 2, 2020.