How Thai Life Insurance can reduce Personal Income Tax in Thailand

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Thai insurance companies provide two types of life insurance which trigger a personal income tax deduction in Thailand:

1.  A regular life insurance policy – Deduction for premiums up to THB100,000 per year. The policy must be contributed to for a minimum of 5 years with 10-year coverage.

2.  A Pension Life Insurance Policy – Deduction for premiums up to THB 200,000 per year under the following conditions:

* The amount claimed for this deduction must not exceed 15% of the taxpayer’s annual assessable income.

* The sum of the Pension Life Insurance premium and any contributions to either: a provident fund, government pension fund, welfare fund under the private school law and/or any investment in the Retirement Mutual Fund (RMF) must not exceed THB 500,000 in any calendar year.

* If a taxpayer does not fully claim a regular life insurance deduction (clause 1 above) up to a maximum of THB 100,000 they may claim up to a maximum of 300,000 baht tax deduction on contributions to a Pension Life Insurance policy.

Contributions to the policy must be maintained for a minimum of ten years. The pay-out period should be between the ages of 55 and 85 but requests for payment prior to this will be considered providing there have been contributions for five years.

Example

Below is an example which illustrates how someone who earns THB 5,000,000 per year would benefit by purchasing life and pension life insurance.

Summary

If someone with an income of THB 5m pays THB 300,000 total in life and pension life insurance premiums, those premiums would be added to the tax allowance. The tax rebate would amount to THB 111,000; making the net premium price just THB 189,000. With a calculated return of 37%, the percentage gain over the net premium would be 58.7%, without including annual growth of the investment. At the same time he/she has the peace of mind of having a life and pension insurance – a potentially useful benefit. Even better, you can show your beneficiaries (e.g. Thai wife etc), that they will benefit if you should unfortunately part this mortal coil earlier than planned. However, I suppose, on the other hand it may just encourage them to help you on your way…in other words – Caveat Emptor!

Example of tax calculation with and without life insurance.
DescriptionStandard deductionsIncluding Insurance Premiums
Income5,000,0005,000,000
Expense60,00060,000
Allowance
Personal30,00030,000
Spouse
Children
Children’s education
Parent
Life Insurance premium100,000
Pension Life Insurance premium200,000
Housing Interest
Social security fund
Provident fund
Donation
LTF/RMF
Total Allowance30,000330,000
Net Income4,910,0004,610,000

 

Tax Calculation
Net IncomeRateIncome AmountTax PayableIncome AmountTax Payable
1 – 150,0000%150,000.000150,0000
150,000 – 500,00010%350,000.0035,000350,00035,000
500,001 – 1,000,00020%500,000.00100,000500,000100,000
1,000,001 – 4,000,00030%3,000,000.00900,0003,000,000900,000
over 4,000,00037%910,000.00336,700610,000225,700
Total Tax1,371,7001,260,700
*** Saving of THB 111,000

 

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]