Money flows into and out of the provident fund can be divided into three streams: contributions, returns on investment and benefit payouts. Countries apply different tax policies to these streams. Some applies the Taxed-Exempted-Exempted (TEE) system where contributions are subject to taxation while the other two flows are not. Others may choose the Exempted-Exempted-Taxed (EET) system where only benefit payouts are tax levied. In Thailand; however, the government opts for tax exemption on all of the three streams, i.e., the Exempted-Exempted-Exempted (EEE) system, which offers full incentives for retirement savings through provident funds.
Under the EEE system, tax exemptions are structured as follow:
1.1 Employee contribution: The actual sum not exceeding 10,000 baht per annum is tax deductible. The excess of 10,000 baht but not more than 15% of the wage and does not exceed 490,000 baht per annum is also tax exempted.
1.2 Employer contribution: The actual sum is deductible as expense for corporate income tax. However, the deductible amount shall not exceed 15% of the wage.
2. Returns on investment
Returns on investment, e.g., interest payments, dividends, capital gains are tax exempted.
3. Benefit payouts
The provident fund is set up to provide adequate saving after retirement and the tax incentive scheme is granted to support such purpose; therefore, those who do not maintain membership until retirement will not gain full tax benefits or not at all. The tax calculations on benefit payouts are as follow:
Case 1: Termination of employment with employment period of less than 5 years
The total benefits excluding employee’s contribution are included in the taxable income.
Taxable benefits payout = the employer’s contribution + returns on investment from the employee’s contribution + returns on investment from the employer’s contribution
Case 2: Termination of employment with employment period of more than 5 years
Members can choose either to include the total benefits (excluding employee’s contribution) in the calculation of the taxable income or to separate tax payment for the specific amount, in which case the tax calculation is as follows:
Taxable Amount = [ Total Benefits Received – ( 7,000 x Years of Employment ) ]*0.5
NOTE: only an employment period of at least 183 days is counted as one year of employment.
Case 3: Termination of membership at retirement age of 55 years or older with membership period of more than 5 years
The whole sum of benefit payouts is tax-exempted upon conditions that the member reaches his/her retirement age as stipulated in the fund’s article but not less than the age of 55 and has maintained a continued membership for not less than 5 years. If the member fails to meet any of the conditions, the tax calculation in ‘Case 2’ above shall be applied.
last updated date 29/04/2553