Page 30 - Masala Lite Issue 159 March 2024

CASH COURSE WITH ATUL
30 DO NOT LET THE CHANGE IN Options to Invest Globally are Aplenty

THE TAX CODE DETER YOU FROM There are many ways to access offshore investing from Thailand, and investors can
use this to their benefit. This can be directly offshore or onshore via local financial
INVESTING ABROAD institutions. Retail investors can transfer money into investment accounts and/or
assets offshore with a license issued by the Bank of Thailand. The application process
is electronic and provides an annual limit of USD 5 million for outbound transfers.
Change to Tax Rule Has Many are not aware of this.

Left Many Bewildered Investing in global assets domestically is also an option. Foreign asset managers
are not allowed to operate domestically, and offer foreign investment products to
Thai investors. Retail investors are unable to purchase a Vanguard ETF, for example.
Foreign funds are available only via mutual funds that are ‘wrapped’ by Thai banks.
You can only invest in an S&P 500 index fund by investing in a Thai bank mutual fund
where the underlying holdings are invested in said index fund. These are referred to
as Foreign Investment Funds (FIF).
This is not very efficient, and often investors are penalised. Often, Thai banks charge
a management fee on top of what the underlying index fund charges. Investors have
caught on to this, and I’ve seen more cases where Thai banks waive or charge nominal
fees for these structures.
An alternative to the FIF structure is to purchase offshore assets via a Thai broker.
Many offer ‘Global’ trading accounts that are tied to a foreign low-cost broker such
An update to the income tax regime has left many investors confused and concerned
about investing abroad from Thailand. Following the change, Thai taxpayers are as Interactive Brokers. Commissions are not as low as if you trade though the low-
cost broker directly. The Thai broker needs to make their cut. This is a great option
required to include any capital gains earned abroad in their income tax filing when
funds are repatriated. for investors that want to bypass the FIF products to access global investments.
The update was made to an existing tax ruling that previously allowed investors a The Additional Work is Worth It
healthy degree of latitude in avoiding paying any taxes. The Thai Revenue Department Taking the extra effort to set up accounts and/or spend more time doing taxes is
announced the change last September, and it is now effective beginning 2024.
worth it if it means not restricting yourself to domestic investments. Decades ago,
Many investors are unsure how to navigate the new regime. The impact will vary by most investors did not have the luxury of accessing global investments. There was
individual depending on what income tax bracket the capital gains are added to, as no infrastructure that supported this and as a result, home-country bias is rampant.
Thailand applies progressive tax rates on income. Today, this is no longer the case.
Some wonder whether investing abroad is worth it given this new hurdle. Investment A longer form of this article was published as a blog post on Farnam Tree’s website
profits earned from domestic assets are not subject to capital gains tax, and in theory (www.farnamtree.com/blog). You can read the full form on the website.
are simpler to navigate. The easier option is not always the best option.

Do Not Close the Door
Limiting your investment pool to domestic assets in Thailand is foolish, and investment Atul Sethi is the founder and CEO of Farnam Tree, a
returns will most suffer as a result. There is enough literature and public commentary licensed boutique investment firm based in Bangkok.
disparaging Thai investments, particularly the local stock exchange. Instead of Atul has over twelve years’ experience working in
repeating the same arguments, I will highlight the facts. investment banking and as a research analyst, prior
to starting Farnam Tree.
The Thailand Stock Exchange has returned 1.9 percent in the past decade. In total,
not per annum. If you have capital gains by investing abroad, at least you have made
profit. Many investors that have restricted themselves to Thailand have received
no – or negative – returns.

MASAL A LITE ISSUE 159 - MARCH 2024