Shorter holding period for tax-deductible funds considered
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Shorter holding period for tax-deductible funds considered

Deputy Finance Minister Julapun Amornvivat (photo: Government House)
Deputy Finance Minister Julapun Amornvivat (photo: Government House)

The Finance Ministry is considering measures to support the stock market, particularly shortening the holding period for tax-deductible stock mutual funds as an incentive for investors.

Deputy Finance Minister Julapun Amornvivat said on Tuesday the long holding periods might be shortened if they are assessed as being a disincentive to investors. He said he believes current conditions requiring a holding period of up to 10 years is too lengthy.

Mr Julapun said measures to bolster the stock market are not related to short-term fluctuations, but rather creating mechanisms to support the capital market, such as tax-deductible funds like the long-term equity fund (LTF) and the Thai ESG Fund.

The ministry is examining the feasibility of implementing measures that would provide value in relation to the tax revenue the state might lose, he said.

According to Mr Julapun, the stock market's volatility stems from short-term political factors, not fundamental factors.

He noted the local bourse rebounded on Tuesday following news that former premier Thaksin Shinawatra was granted bail.

As for the market support measures, reviving the LTF or enhancing the appeal of Thai ESG are both being considered, with only one option promoted, said Mr Julapun.

The ministry allowed LTF personal income tax deductions to expire, replacing them with the Super Savings Fund (SSF), which have a holding period of 10 years, rising from seven years for LTFs.

SSF investment allows tax deduction up to 30% of income, capped at 200,000 baht.

When combined with other retirement savings funds, such as the retirement mutual fund, provident funds, government pension funds, private school teacher welfare funds, national savings funds, or life insurance premiums for retirement plans, the total must not exceed 500,000 baht.

The tax benefits are available for five years (2020-2024), after which the ministry is scheduled to review the measure.

For the Thai ESG fund, tax deductions are capped at 30% of annual income with a maximum investment of 100,000 baht and no minimum investment requirement.

The Thai ESG investment limit is separate from other retirement savings funds, allowing for an additional tax deduction of up to 100,000 baht, bringing the total potential tax-deductible amount, including other retirement funds, to 600,000 baht.

Investment in Thai ESG funds requires a holding period of eight years from the purchase date, calculated on a day-to-day basis, not by calendar year.

The deduction applies to the year of the purchase, and there is no requirement to purchase continuously every year.

In a separate development, deputy government spokeswoman Rudklao Intawong Suwankiri said the cabinet on Tuesday approved the draft royal decree regarding the exemption of personal income tax for terminated employees.

According to Mrs Rudklao, the legislative committee completed the decree, which is designed to align with the 2019 version of the New Labour Act, increasing the severance pay cap from 300 days of the final month's salary, not exceeding 300,000 baht, to 400 days, but not exceeding 600,000 baht, effective from Jan 1, 2023.

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