The Cabinet recently approved the principles of the Ministry Regulation draft, version .. (B.E. ….), in accordance with the provisions of the Revenue Code concerning tax incentives to promote sustainable investments in the country. The proposal, submitted by the Ministry of Finance, is now under consideration by the Office of the Securities and Exchange Commission (SEC).
The key points of the proposal are as follows:
1. Government Policy on Sustainable Development: The Thai government is committed to sustainable development as a vital force driving the country’s economy. In line with this, the Thai Capital Market Business Association has proposed to the SEC the utilization of the Thai capital market as a mechanism to achieve goals related to competitiveness and the sustainability of the country. The association, in collaboration with the SEC, convened on November 14, 2566, reaching a consensus to establish the “Thailand ESG1 Fund (TESG).” This fund is designed to receive tax benefits, promoting investments in sustainable businesses.
2. Investment Mechanism of TESG Fund: Investments made by the TESG fund will involve channeling funds from unit sales into sustainable businesses. These investments will prioritize companies engaged in sustainable practices, considering environmental, social, and governance (ESG) factors. Investments in securities will focus on companies listed on the Thailand Sustainability Investment (THSI) of the Stock Exchange of Thailand, currently comprising 210 companies in various sectors such as transportation, waste management, resources, energy, real estate, and more. Additionally, investments in debt securities will align with sustainable bond criteria, including green bonds, social bonds, sustainability bonds, and sustainability-linked bonds.
3. Tax Incentives: To support the government’s sustainable development policy, the proposal suggests amending the Ministry Regulation to exempt individuals who purchase TESG units from taxable income, up to 30% of income, with a maximum of THB 100,000 per tax year. This exemption will apply only to assessable income that does not exceed THB 100,000. The exemption calculation will not include income derived from exempted sources. Investors must hold the investment units for a minimum of eight years from the date of purchase.
4. Projected Impact and Losses: The SEC estimates that in the first year (2023), there will be around 100,000 new investor accounts, followed by an additional 300,000 accounts in the subsequent years. This influx is expected to generate new investments of THB 10 billion and THB 30 billion, respectively. While the government anticipates losses in tax revenue due to exemptions for individual taxpayers, it foresees overall benefits in terms of increased savings, long-term investments in the Thai capital market, and the promotion of environmentally and socially responsible business practices.
The proposed Ministry Regulation is currently under review and is expected to support the government’s vision for sustainable development.
Summary of Ministry Regulation Draft
✓ ESG (Environment, Social, Governance) focuses on sustainable business practices, considering environmental, social, and governance factors. The Thai SEC is in the process of announcing support for the establishment of the Thailand ESG Fund.
✓ Sustainable Development Goals (SDGs) are globally recognized goals for development, categorized into 17 goals across 5 dimensions: People, Prosperity, Planet, Peace, and Partnership.
✓ Carbon Neutrality aims to balance carbon emissions and absorption.
✓ Net Zero refers to achieving a balance between greenhouse gas emissions and removal.