In a strategic move to support the Thai capital market amidst ongoing economic challenges, the Thai government has approved the creation of the Thai ESG Extra (ESGX) fund. The initiative is designed to encourage sustainable investments, bolster the Stock Exchange of Thailand (SET), and provide attractive tax incentives for investors. This comprehensive measure allows investors to transfer their Long-Term Equity Fund (LTF) investments into the ESGX fund, with an array of tax deductions available to maximize financial returns.
The Thai cabinet’s approval of the ESGX fund includes provisions for personal income tax deductions of up to 500,000 THB. Specifically, investors who switch their LTF investments to the ESGX fund can receive a tax deduction of 300,000 THB for the current year, with the remaining 200,000 THB deductible annually over the following 4 years. In addition, further investments of up to 300,000 THB in Thai ESG units made between May and June of this year are also eligible for tax deductions, providing an opportunity for both new and existing investors to capitalize on the initiative.
To summarize tax benefits for Thai ESG Funds in 2025, there will be 3 distinct tax benefit categories for Thai ESG-related funds, with a total deduction limit of up to 900,000 THB as follows:
- New Investments in Thai ESG funds: All investors purchasing Thai ESG units in 2025 are eligible for a tax deduction of up to 30% of their taxable income, with a maximum deduction of 300,000 THB
- New Investments in Thai ESGX Funds: All investors purchasing Thai ESGX units during May and June 2025 can receive a tax deduction of up to 30% of their taxable income, with a maximum deduction of 300,000 THB
- Transfer of LTF Units to Thai ESGX Funds: Investors transferring their LTF units to Thai ESGX are eligible for a tax deduction in the first year (2025) of up to 300,000 THB, and for subsequent years, up to 50,000 THB per year for a total of 4 years.
It is important to note that the tax deductions for both categories of the Thai ESGX Fund are separate and do not include the standard Thai ESG Fund.
However, the tax deduction initiative comes at a financial cost. It is expected to result in a loss of approximately 50 billion THB in tax revenue over five years, with 165 billion THB in investments eligible for deductions. The government’s goal is to boost investor confidence, especially following recent market downturns and challenges in global trade. ESG stocks, which align with global sustainable market trends, are seen as a key to this recovery.