BANGKOK — Finance Ministry reveals that Thailand’s ESGX measures will cost the state about 40-50 billion baht ($1.18-1.47 billion) in lost revenue but will stabilize Thailand’s capital market – SET confident it will curb LTF sell-offs
Mr. Pornchai Teerawet, Director of the Tax Policy Office and Spokesperson of the Ministry of Finance, announced that the Cabinet approved the establishment of the Thai ESG Extra Fund (Thai ESGX) on March 11, 2025.
This initiative proposed by the Ministry of Finance aims to create tax incentives to encourage investment in sustainability-focused stocks (ESG) while improving the stability of Thailand’s capital market. According to the proposed ministerial regulations, the scheme is expected to result in tax losses of around 40-50 billion baht (1.18-1.47 billion US dollars) over the life of the program.
This measure allows holders of Long-Term Equity Funds (LTF) to switch their entire investment into the Thai ESG Extra Fund (Thai ESGX) while retaining their tax benefits. The switch must be made within a two-month window, from May 1 to June 30, 2025, and investors must then hold the Thai ESGX shares for at least five years from the date of the switch.
“This measure will result in a government revenue loss of no more than 50 billion baht ($5.3 billion), which is about 75% of the estimated investment value of 180 billion baht. It is expected that about 135 billion baht ($3.9 billion) of this amount will be reinvested by investors willing to continue investing in the Thai ESGX, while the remaining investors may choose to sell their holdings and invest their funds elsewhere,” Mr. Pornchai explained.
SET index 2025 Has Plunged 17.9%
Mr. Assadej Kongsiri, President of the Stock Exchange of Thailand (SET), stated that the measure will undoubtedly help slow down the sell-off of LTF. Thai stock market index has fallen by about 14%, resulting in a market value loss of nearly 200 billion baht.
This initiative is in line with the SET’s Jump Plus project, which aims to encourage listed companies to increase their value. Detailed plans for this initiative will be announced soon, with the aim of promoting sustainable growth of the Thai stock market.
Sorapon Tulayasathien, Deputy Manager and Head of Corporate Strategy Planning at SET, added that at the end of February 2025, the Thai stock index was in a correction phase, dropping 17.9% from its recent peak. The dividend yield is currently at an attractive level compared to historical trends. The market’s P/E ratio stands at 12.5-16.6 times and P/BV ratio at only 1.2-1.4 times, significantly lower than average values during previous correction periods.
During this market correction, stocks with high P/E ratios experienced the largest declines, indicating market concerns about risk and overvaluation. Capital market authorities are implementing measures to support index recovery, focusing on strong economic growth, limiting trade policy risks, and driving the market by attracting new investment and enhancing the value of Thai listed companies.
He noted that the Thai stock market is not experiencing volatility alone—other markets are affected too, largely due to U.S. President Donald Trump’s 2.0 trade war. He compared Thai stocks to small boats facing large waves, inevitably fluctuating with the changing tides. However, he believes the index has already fallen lower than it should have, suggesting the decline is primarily driven by emotional trading and investor sensitivity, making the Thai stock market even more vulnerable.
Positive Factor for LTF Unitholders
Meanwhile, the Secretary-General of the Securities and Exchange Commission (SEC) of Thailand, Pornanong Budsaratragoon, explained that the measure aims to promote long-term investment saving and encourage capital mobilization. She emphasized that it will also help alleviate pressure from the sell-off of long-term bonds.
This measure is a positive factor that will give LTF unitholders options. Having choices is certainly better than having no choices. As for whether this measure will affect all stocks in the market, the establishment of ESG is for stocks that must meet ESG criteria, which currently includes more than 240 stocks,” Mrs. Pornanong said.
Important tax incentives for Thai ESGX investors
1. New investors in Thai ESGX
Tax advantages:
- Investments in Thai ESGX can be deducted from income tax at a rate of up to 30% of taxable income, subject to a cap of 300,000 baht.
- Investors must purchase Thai ESGX shares within the two-month period from May 1 to June 30, 2025.
- Any income or benefit from the sale of Thai ESGX shares is exempt from income tax.
Eligibility requirements: - Investors must hold their Thai ESGX shares for at least five years from the date of purchase to qualify for the tax benefits.
2. LTF Investors Switching to Thai ESGX
Tax advantages:
- The full value of LTF units switched to Thai ESGX can be deducted from personal income tax, with a maximum cap of 500,000 baht. This deduction is structured as follows:
- For the 2025 tax year: a maximum of 300,000 baht.
- For the 2026–2030 tax years: a maximum of 50,000 baht per year.
- Any income or benefits derived from the sale of Thai ESGX units will be exempt from personal income tax.
Eligibility requirements:
LTF investors must exchange their entire LTF holdings into Thai ESGX within two months of the first available exchange date, but no later than June 30, 2025.
Investors must hold their Thai ESGX shares for at least five years from the date of conversion to qualify for the tax benefits.
The calculation of the tax deduction is based on the number of shares held at the time of Cabinet approval, with share prices determined at the time of the exchange request.
For general investors in 2025, the tax deduction limit for Thai ESGX will be in addition to the current tax deduction limit for Thai ESG investments. However, from 2026, the deduction for Thai ESGX will be merged with the existing Thai ESG tax deduction limit.
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