Looking beyond tax savings

Tax breaks should not be the only factor driving year-end investment decisions. Investors are urged to look beyond tax deductions and weigh risks, investment horizons and protection needs when choosing funds and insurance policies.

With the final months of 2026 approaching, investors are reviewing their tax positions and considering retirement mutual funds (RMFs), Thai ESG funds and life insurance to reduce taxable income.

Financial goals, risk tolerance, investment horizons and the ability to maintain contributions or premium payments over the long term are more important than tax benefits, said investment advisors. Rather than buying products simply to use up tax allowances, investors should review existing deductions and choose investments that suit their financial circumstances.

UNDERSTANDING TAX LIMITS

RMF investments qualify for a tax deduction of up to 30% of assessable income, capped at 500,000 baht. This allowance is included in the combined 500,000-baht ceiling for qualifying retirement savings, which also covers provident funds, the Government Pension Fund, the National Savings Fund and eligible annuity life insurance premiums.

RMFs are designed for long-term retirement savings. Investors must hold units for at least five years from the first purchase and must be 55 or older before redemption. RMFs also carry investment continuity requirements, and failure to meet the conditions may result in the loss of tax benefits and additional tax liabilities.

Thai ESG funds offer a separate incentive. For qualifying purchases made between Jan 1, 2024 and Dec 31, 2026, investors can deduct up to 30% of assessable income, subject to a 300,000-baht ceiling. Units must generally be held for at least five consecutive years from the purchase date.

The Thai ESG allowance is separate from the retirement savings ceiling. Investors should distinguish ordinary Thai ESG investments from the special tax treatment for those who switched long-term equity fund holdings into Thai ESGX units in 2025. Eligible deductions under that conversion may be spread over subsequent tax years, subject to conditions.

Insurance premiums also qualify for deductions. Eligible life insurance premiums are deductible up to 100,000 baht, while personal health insurance premiums qualify for up to 25,000 baht, provided the combined deduction does not exceed 100,000 baht.

Health insurance premiums paid for parents may be deducted up to 15,000 baht, subject to income conditions. Life insurance premiums for a non-earning spouse may qualify for a deduction of up to 10,000 baht.

Annuity life insurance premiums qualify for a deduction of up to 15% of assessable income, capped at 200,000 baht, within the combined 500,000-baht retirement savings ceiling. Investors should calculate their remaining allowance after accounting for other qualifying contributions. The same premium cannot be claimed twice under different deduction categories.

PROTECTION NEEDS

Life insurance can complement investment and tax planning by protecting income, savings and family finances. Nusara Banyatpiyaphod, president of the Thai Life Assurance Association, advises consumers to review their financial commitments and existing coverage before buying additional policies.

Consumers should first assess annual income, existing tax deductions and premiums already paid. Tax deductions reduce assessable income rather than directly reducing tax payable, so the actual benefit depends on taxable income and the marginal tax rates.

People should also consider their life stage, financial responsibilities and protection needs, including life coverage, medical expenses and potential retirement income. Employer-provided benefits and existing policies must be calculated to avoid overlapping coverage.

Before purchasing a policy, consumers should understand its benefits, exclusions, premium-payment period and coverage duration. Health insurance premiums may rise with age, so affordability over the long term is important.

For health insurance covering parents, the deduction is subject to conditions, including an income threshold for each parent. Where siblings share premiums, claims must follow the applicable tax rules, and the same expense cannot be claimed more than once.

Annuity insurance requires attention because its tax treatment is linked to other retirement savings. Premiums may qualify for a deduction of up to 15% of assessable income, capped at 200,000 baht, within the overall retirement savings ceiling.

Policyholders should check premium receipts and tax certificates to ensure insurers have the information or consent required for tax reporting. Ordinary life insurance policies generally need a coverage period of at least 10 years to qualify for tax deductions.

Annuity policies have additional requirements governing premium payments and the age at which pension benefits are paid.

Consumers should be cautious about cancelling or surrendering policies early. Surrender values in the initial years may be lower than premiums paid, while terminating or changing a policy can affect protection and tax eligibility. Failure to meet tax conditions may require previously claimed deductions to be reversed, with additional tax and surcharges where applicable.

Ms Nusara advises consumers to treat insurance primarily as financial protection, with tax benefits a secondary consideration. A policy should provide appropriate coverage and remain affordable throughout the payment period. Tax planning is most effective when it supports a sustainable long-term financial plan rather than prompting last-minute purchases driven solely by deductions, she noted.

Revenue Department tax rules and eligibility can be checked at www.rd.go.th.

WIDENING INVESTMENT CHOICES

InnovestX Securities said the proposed Thailand Individual Savings Account (TISA) scheme could broaden investment choices and benefit high-dividend stocks, although it is unlikely to provide a substantial boost to liquidity in the local equity market.

Unlike older structures that required the purchase of dedicated mutual funds (such as RMF, Super Savings Funds (SSF) or Thai ESG), TISA acts as an all-in-one individual account. Investors can manage their own tax-incentivised portfolios by purchasing individual Thai equities, bonds, or mutual funds directly.

Finance permanent secretary Lavaron Sangsnit recently said more than 90% of the TISA framework had been finalised. Discussions with capital market participants are continuing on tax incentives and conditions, with Cabinet consideration expected this year. Investments are scheduled to begin in 2027, with related tax filings starting in early 2028.

InnovestX estimates the proposed 600,000-baht tax deduction ceiling is equivalent to the combined allowances available under the existing framework in 2027.

The temporary Thai ESG tax incentive, which allows deductions of up to 300,000 baht subject to a five-year holding period, expires this year. The allowance then reverts to 100,000 baht, with an eight-year holding requirement.

Combined with the 500,000-baht allowance for retirement savings through RMFs, provident funds (PVDs) and SSFs, the total would remain at 600,000 baht.

InnovestX views TISA as a way for the government to preserve the tax deduction framework while using additional tax exemptions to encourage long-term investment as Thailand prepares for an ageing society.

Securities companies could benefit from a greater role as integrated investment account providers. Direct investment could stimulate trading among clients seeking lower fees while creating opportunities for securities firms to expand their wealth management platforms, noted the brokerage.

Fund managers could face greater competition as investors gain alternatives to mutual funds. InnovestX expects investment performance and differentiated products to become more important in attracting assets under management.

However, greater flexibility in asset allocation could limit TISA's contribution to equity market inflows as investors may shift into debt instruments during periods of stock volatility rather than maintaining their tax-incentivised investments in equities, said the brokerage.

If TISA proceeds as proposed, InnovestX recommends investors allocate their first 600,000 baht according to their individual risk tolerance. Direct investment could help to reduce costs by avoiding mutual fund management fees.

For an additional 200,000 baht, the brokerage favours fundamentally sound securities that offer consistently high dividends.

The proposed exemption from the 10% dividend withholding tax could further enhance the appeal of these stocks to investors seeking long-term income.

INVESTMENT GOALS

According to Finnomena, Thailand's largest wealth tech platform by revenue, RMFs cover a wide range of asset classes, investment themes and markets. Investors should choose funds based on their retirement horizon, risk tolerance and existing portfolio exposure.

For long-term growth, K-GTECHRMF invests in global technology companies, while TAIRMF-A focuses on artificial intelligence and big data. SCBRMGHC provides exposure to healthcare equities, K-GIFRMF invests in global infrastructure, and MRENEWRMF targets clean energy businesses.

These sector-focused funds offer growth potential but carry risks related to valuations, regulation, interest rates, government policies and project financing.

Investors seeking geographic diversification can consider KKP GNP RMF, which invests in global equities through a multi-manager approach, and KF-US-PLUSRMF, which focuses on US equities, said Finnomena. SCBRMMLCA invests in Chinese equities using machine-learning-based stock selection.

Regional options include B-ASIARMF, which focuses on large companies in high-growth Asian economies; B-INDIAMRMF, which invests in Indian mid-cap stocks; and PRINCIPAL VNEQRMF, which provides exposure to Vietnamese equities. Investors should consider differences in economic conditions, currencies and regulations while avoiding excessive concentration in any single market, noted the platform.

For domestic exposure, THDRMF-A invests in Thai high-dividend stocks within the SETHD universe. It is distinct from TDSThaiESG-A, which is a Thai ESG fund, not an RMF.

Investors seeking broader diversification can consider ES-GAINCOMERMF, which targets income from a global portfolio, and TGSMARTRMF-A, which uses a global multi-asset strategy focused on managing downside risk and volatility.

More defensive options include K-GDBONDRMF, an actively managed global bond fund, and KKP INRMF, which invests in Thai fixed-income instruments. BGOLDRMF provides unhedged exposure to gold, meaning returns are affected by both gold prices and exchange rate movements.

Bond funds remain subject to interest rate, credit and market risks, and do not guarantee principal. Gold prices can fluctuate significantly, while overseas investments carry currency risk. Investors should assess each fund's role in their portfolios rather than relying on recent performance, noted Finnomena.

ESG FUNDS

The platform highlighted three Thai ESG funds with different investment strategies and risk profiles. K-ESGBF-ThaiESG, managed by Kasikorn Asset Management, is a fixed-income fund with a risk level of 4 investing in Thai government and corporate debt that meets environmental, social and governance (ESG) criteria, emphasising investment-grade securities.

KTAG70/30-ThaiESG, managed by Krungthai Asset Management, has a risk level of 5 and allocates roughly 70% to sustainable Thai equities and at least 30% to sustainable debt instruments. TDSThaiESG-A, managed by Tisco Asset Management, has a risk level of 6 and selects Thai equities based on fundamentals and dividend potential, aiming to outperform the SET ESG Total Return Index.

Fixed-income strategies generally have less market volatility than equity-focused funds, although they are not risk-free and do not guarantee principal.

As of Oct 22, the five best-performing Thai ESG funds in Morningstar Global's coverage were TDSThaiESG-A, with a year-to-date return of 44.8%, T-ThaiESG-A at 34.3%, KKP EQ THAI ESG at 34%, KFTHAIESGA at 33.7%, and SCBTP (ThaiESGE) at 33.7%.