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Retirement Investment Unit ? |
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Previously, savings for retirements were normally invested
in provident funds. Even though provident fund serves well
as an investment for retirement, they are available to only
a limited group of people, namely corporate or government
employees. With provident funds, the amount invested by
the employees is restricted to the amount contributed by
their employers. There are people, including independent
professionals, who want to invest in provident fund, but
cannot do so because they are not corporate or government
employees, or their employers are not involved in any provident
fund. Retirement Investment Unit is established precisely
to meet this need and to provide people with an alternative
for their savings for retirement
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What is Retirement Investment Unit ? |
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Retirement Investment Units, or generally
known as Retirement Mutual Fund (RMF), is a closed-end tax
privilege Investment Unit. It provide individuals who want
to make a long term investment in order to receive tax-free
fund later at their retirement's age, but don't need to receive
any kinds of dividends during investment period.
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Tax benefits for investor in Retirement
IU's |
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- The actual amount of fund invested in Retirement IU's
is exempted from tax, but the annual amount of exemption
cannot exceed 15% of annual income, and the total amount,
including contribution to provident fund, cannot exceed
300,000 Baht.
- Retirement IU's that has an investment period longer
than 5 years, if redeemed after the investor has reached
55 years of age, are eligible to tax exemption.
- Redemption due to disability or death of investor, the
whole amount redeemed is tax exempted.
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Investment conditions |
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- Investor must continue to purchase Retirement IU's at
least once a year and must not pause to make such purchase
more than one consecutive year.
- Investor must purchase Retirement IU's with at least
3% of their annual income or 5,000 Baht each year.
- Investor must invest in Retirement IU's for at least
5 years and continue to invest until the investor reaches
55 years of age.
- If an investor violates one of the first two conditions
or redeemed part of their portfolio of IU's before their
maturity date, and he / she has already returned tax benefit
received in the last five years. Moreover, the investor
want to invest in Retirement IU's with his / her remained
Retirement IU's immediately after already returned tax benefit
in the same year, the investor's previous IU's holding time
is still valid with the Retirement IU's holding time conditions.
- If investor has invested in Retirement IU's for at least
5 years and investors is at least 55 years of age or being
disabled person, investor can extend his/her IUs holding
and he/she can also alter whether or not to make additional
purchase.
- Incomes invested in Retirement IU's that have already
earned tax exemption can not be used to get tax exemption
again in subsequent years.
- Investor can not transfer or pledge Retirement IU's or
using them as collateral.
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Income types eligible for investing in Retirement
IU's |
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- Incomes from employment: wages, salary, bonus, allowance,
pension.
- Incomes from hiring fee
- Incomes from uninherited copyrights
- Incomes from independent profession: law profession,
medical profession, engineering, architecture, accountancy,
and art.
- Incomes from real estate construction
- Incomes from commerce, agriculture, manufacturing, transportation.
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What Retirement IU's invest? |
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Retirement IU is considered as one of Investment
Units, therefore it can invest in securities and assets class
similar to IU's investment such as stocks, bonds, cash, hybrid
securities and warrants
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Tax exempted income calculation |
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To have better understanding of tax benefit
of Retirement IU, we will show you how to calculate the amount
of income eligible for tax privilege.
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Example :
Mr. A is a corporate officer has annual income of 600,000
Baht, this year he also invests 5% of his income equal
30,000 in provident fund. If Mr. A want to invest in
Retirement IU, how much can he invest in the IU's this
year to get the maximum tax privilege.
Calculation
Annual income 600,000 Baht
Provident fund 30,000 Baht
maximum tax exempted income
= Potential tax exempted income - provident fund
= 300,000 - 30,000
= 270,000 Baht
Since, the 15% of Mr. A's income equal 600,000 X 15%
= 90,000 Baht
As a result, Mr. A can invest 15% of his income or 90,000
Baht in Retirement IU's because, the income is in the
range of maximum tax exempted income allowed.
Example :
Mr. B is a corporate officer has annual income for working
with a company of 1,500,000 Baht and earns additional
of 1,000,000 a year from independent profession. Totally
he's made 2,500,000 a year. Mr. B is a member of the
company's provident fund, he pays 5% of his income or
75,000 Baht in the fund. If he want to invest 250,000
Baht of his income in Retirement IU's, can he get tax
exemption for all the money he invests?
Calculation
Annual income 2,500,000 Baht
Provident fund 75,000 Baht
maximum tax exempted income
= Potential tax exempted income - provident fund
= 300,000 - 75,000
= 225,000 Baht
Since, the 15% of Mr. A's income equal 2,500,000 X
15% = 375,000 Baht
Mr. B wants to invest 250,000 Baht of his income in
Retirement IU's, but the maximum tax exempted income
allowed is 225,000 Baht.
Therefore, Mr. B will not get tax exemption of all fund
invested, the amount of his tax exempted income is only
225,000 Baht.
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Last updated: 1st July 2003
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What is Investment Unit (IU) ?