RMF stands for Retirement Mutual Fund, a type of mutual fund serving as an alternative means to save for retirement while entitled to receive certain tax benefits to attract investors.
To receive tax benefits, investment in RMF must meet these terms and conditions:
Remark : For the 5-year requirement, only the years in which investments are made shall be counted. Any year without investment shall not be regarded as part of the investment period.
- Invest continuously every year by purchasing units of RMF at least once a year.
- Do not suspend investment for more than one consecutive year.
- Invest and hold the units until the investor reaches the full age of 55, and must have invested for not less than 5 years, counted from the date of the first investment.
- No minimum investment requirement.
- The maximum investment must not exceed 30% of the taxable income, and when combined with other retirement savings, must not exceed 500,000 Baht in that tax year (other retirement savings include provident funds, the Government Pension Fund, annuity life insurance, the Private School Teachers’ Welfare Fund, and the National Savings Fund).
Remark : For the 5-year requirement, only the years in which investments are made shall be counted. Any year without investment shall not be regarded as part of the investment period.
The investor must take the following actions:
- In case the investment period is shorter than 5 years and there is a breach of terms and conditions, the exempted tax amount received for all years must be repaid back when the unit trusts are sold; capital gains must be also be calculated when preparing taxes. In practice, when an investor sells unit trusts, the asset management company would deduct 3% of the profit from the transaction. When the investor files income taxes, it will be recalculated to determine whether additional taxes have to be paid.
- In case the investment period is longer than 5 years but there is a breach of terms and conditions, the exempted tax amount for the past 5 prior years (calendar years) must be repaid back by March of the next year after the breach or sale of units.
- There are tax benefits on investments when terms and conditions are met.
- The capital gains for investment periods shorter than 5 years are subjected to personal income taxes.
Like other types of mutual funds, there are many RMFs to choose from, ranging from low-risk funds consisting mainly of bonds, medium-risk funds which distribute risks between bonds and equities, and high-risk funds which focus on equity instruments.
When terms and conditions (described in item 5) are met, investors will receive tax benefits in two ways:
- Money invested in RMF can be deducted from taxable personal income, up to 15% of one’s annual income. When the investment is aggregated with PVD or the Government Pension Fund, the total deduction must not exceed 500,000 Baht. PVD/GPF+RMF (<15% of the annual income)<500,000 baht. If the actual RMF investment amount exceed 15% of the annual income or 500,000 Baht, capital gains from trading of units are subjected to personal income taxes.
- Capital gains from trading of units are exempted from personal income taxes.
RMF is suitable for anyone wishing to set aside money towards retirement, especially those currently without a retirement plan such as Provident Fund or Government Pension Fund, or individuals with such schemes but desire to save even more.
- Suspending fund investment for a period longer than a year despite earning an annual income.
- The amount invested is less than the required minimum.
- The unit trusts are sold before the holder is 55 years old.