What are the benefits of investing in Thailand?
The main reason to invest in Thailand is access to tax-advantaged funds like RMF (Retirement Mutual Fund) and ESG funds. These let you reduce your taxable income whilst avoiding capital gains tax, a compelling benefit despite their higher fees compared to overseas options.
The main draw of tax-advantaged funds
When you invest in tax-advantaged funds, you get two benefits: you lower your taxable income for that year, and you pay no capital gains tax when you eventually sell. This double advantage can make the higher management fees worthwhile if you’re committed to staying in Thailand long-term.
However, there’s a catch. Most, if not all, tax-advantaged funds like ESG require you to hold investments for a minimum period (previously SSF and LTF required eight to ten years). RMF funds are even more restrictive – you can only withdraw once you reach 55 years old. If you’re planning to stay in Thailand short-term, these lock-in periods become a problem rather than a benefit.
Fund selection and accessibility
Thailand offers both domestic and foreign funds through local asset management companies. You’ll find familiar options like S&P 500 index funds and developed world equity funds, which makes it easier to build a portfolio you’re comfortable with.
Opening an investment account and funding it is straightforward. You can transfer your Thai income directly to your investment account and make purchases through the app during trading hours. This simplicity is an advantage over the slightly higher complexity of funding overseas accounts from Thailand.
What doesn’t make sense
Domestic Thai funds focused on the SET (Stock Exchange of Thailand) generally show poor performance. In my view, the domestic ESG funds aren’t worth considering either.
If you’re going to invest in Thailand, you may want to stick to the internationally-focused tax-advantaged funds that give you global exposure with Thai tax benefits.
Bottom line on Thai investing
Thai tax-advantaged funds work well if you’re planning to stay in Thailand for at least five to ten years and want to reduce your current tax burden. The combination of income tax deductions and no capital gains tax can offset the higher fees.
But if your timeline is shorter or uncertain, the mandatory lock-in periods make these funds impractical.
What are the benefits of investing overseas?
Investing overseas gives you access to a broader selection of funds with lower fees. You’ll also benefit from holding assets in more stable and less restricted currencies and having the flexibility to relocate during retirement without needing to sell your Thai investment positions.
Better selection and lower costs
Overseas brokerages offer significantly more fund options at lower costs than Thai asset management companies. As an example, a global index fund that costs 0.24% annually overseas might cost 0.87% or more when wrapped in a Thai fund structure. Over decades, this fee difference compounds substantially.
You’ll also find it easier to build a globally diversified portfolio when investing overseas, with direct access to funds that Thai investors can only reach through local wrappers, if they’re available at all.
Legal and tax considerations
Depending on where you’re from, not contributing to your home country’s investment system whilst living abroad can create legal complications. UK pension schemes and US retirement accounts have specific rules about contributions and residency that you’ll need to navigate.
If you haven’t started investing yet, consider which account type makes sense for your citizenship. Andrew Hallam’s book “Millionaire Expat” provides detailed guidance on this topic for different nationalities.
The foreign account funding challenge
To fund an overseas brokerage account from Thailand, you’ll need to send an international transfer. You can transfer money directly from your Thai bank to your brokerage, or route it through an intermediary account like Wise. Both methods work well, though using an intermediary adds an extra step. Either way, expect longer processing times compared to local funding.
For these international transfers (whether sending directly to your brokerage or to your personal bank account first) you can use either Thai bank transfers or DeeMoney, both work well.
What about currency risk with overseas investing?
If you plan to retire in Thailand and your overseas portfolio is in EUR or USD, you’re exposed to exchange rate fluctuations. A strong Thai baht relative to your investment currency means you’ll get less when you eventually convert back. This risk cuts both ways, of course – a weak baht would work in your favour.
Will I pay tax when bringing overseas investment gains into Thailand?
Thailand recently closed the foreign income tax loophole. When you eventually bring your overseas investment gains into Thailand, they’ll likely be taxed as ordinary income, and you may face capital gains tax depending on how the regulations develop.
This adds another layer of complexity to overseas investing for Thailand-based expats.
Bottom line on overseas investing
Overseas investing makes sense if you want lower costs, better selection, and aren’t certain about staying in Thailand long-term. The trade-off is more complexity in funding your account and exposure to currency risk if you do end up retiring here.
Combining both approaches for best results
You don’t have to choose one or the other. Many expats find that a split approach makes sense – using Thai tax-advantaged funds to reduce their current tax burden whilst building an overseas portfolio for flexibility and lower costs.
For example, you might maximise your RMF contributions each year to claim the tax deduction (up to 30% of assessable income, capped at 500,000 THB), whilst simultaneously building a low-cost index fund portfolio with an overseas broker like Interactive Brokers, Vanguard or others.
This gives you the immediate tax benefits of Thai investing whilst maintaining a globally diversified portfolio that isn’t locked into Thailand’s higher fee structure. The overseas portion also provides currency diversification and flexibility if your plans change.
The split that makes sense depends on your income level, how certain you are about staying in Thailand, and how much you value the tax savings versus investment flexibility.
Which approach will suit you?
Here’s how to think about your situation:
If you’re planning to stay in Thailand 10+ years, tax-advantaged Thai funds (RMF, ESG) make sense as your core holdings. The tax benefits and no capital gains tax will likely outweigh the higher fees. You can supplement with overseas investments for additional diversification.
If you’re staying 5-10 years, consider a balanced approach. Use Thai tax-advantaged funds to reduce your current tax burden, but keep a significant portion overseas for flexibility. Pay close attention to RMF lock-in periods if you’ll reach 55 within your timeline.
If you’re staying less than 5 years, skip Thai tax-advantaged funds entirely. The lock-in periods will create problems when you leave. Focus on building or maintaining your overseas portfolio and simply keep your Thai income in high-interest savings accounts or short-term deposits.
If your timeline is uncertain, lean towards overseas investing. You’ll pay more tax now but avoid being locked into Thai funds if your plans change. The flexibility is worth more than the tax savings when you don’t know how long you’ll stay.
Conclusion
As you know by now, whether you should invest in Thailand or overseas depends entirely on your timeline and priorities. Thai tax-advantaged funds offer genuine tax benefits but come with lock-in periods and higher fees. Overseas investing gives you better selection and lower costs but increases complexity and currency risk.
Most long-term expats benefit from using both approaches: maximising Thai tax-advantaged contributions for immediate tax savings whilst building a diversified overseas portfolio for long-term flexibility. Those with shorter or uncertain timelines are usually better off focusing on overseas investments and avoiding Thai fund lock-in periods.
