The Provident Fund Act of B.E. 2530 (1987) governs the establishment of an alternative savings scheme by the mutual agreement of an employee and its employees. The purpose of the fund is to provide a benefit to employees while encouraging savings for retirement. Employees make voluntary contributions to the fund in a range of 2 to 15 per cent of their income, based on the fund’s rules and on the stipulation that the employer makes contributions that are equal to or greater than those made by the employee.
An exemption is made for provident fund contributions when calculating personal income tax liability, which along with other retirement mutual fund contributions, can amount to a maximum of 15 per cent of the taxpayer’s income but not exceed 500,000 baht.
An individual’s provident fund memberships terminates when one of three conditions arises. The first is the employee’s retirement at age 55 – or older if there is a stipulation about an older retirement age in the fund’s rules. The second condition is if the employee resigns, and the third condition is the death of the employee.
When membership is terminated, the individual is entitled to receive a payout of the amount due from the benefit package as per the fund’s rules. There is also a portability provision with some provident funds, meaning that the proceeds could be rolled over into a provident fund offered by the individual’s next employer. There are also legal provisions allowing installment payments of the proceeds.
As part of our payroll service package offered to clients, Juslaws & Consult manages provident fund contributions, making sure that the company operates within the provident fund’s rules and abides by Thailand’s tax laws.