Thailand is a vacation paradise, and for those of us working, it offers great job opportunities and low taxes. It’s an actual tax haven. But all in all it’s not really a business friendly destination for foreigners and investors alike. There are plenty of rules and regulations, as well as special arrangements that one needs to follow to be able to settle here.
When it comes to investments in the stock market, there is a crucial point that one needs to understand and to accept. Like for many other things, there is also a two-tier system catering to domestic, and to foreign investors.
The domestic and the foreign board
Foreign investors who purchase shares in the Thai stock market receive generally no voting rights for the equities they purchase, and no dividends. I know. That’s not fair. When you purchase shares, you become a co-owner of the company so you should rightfully expect to be entitled to both. But that’s not how it works here.
Obviously, this has not been a popular policy. Therefore, to attract more foreign investments the country had to find a way to balance their desire to protect the domestic market from cash-loaded foreign players, while at the same time giving foreign investors just enough incentives to take advantage of the overall positive business environment. Hence, they developed two investment boards. One for domestic players, and one for foreigners.
The domestic market board includes all shares that can be actively traded in Thailand, and generally speaking, everyone can trade on it. The key point is, however, that foreigners who purchase shares on the domestic board won’t be eligible to any voting rights, nor any dividend payments. Capital gains from active buying and selling shares are therefore the only way of generating income.
The foreign board includes only shares of companies which are designated to be available for trade by international investors. This does actually refer to almost all listed companies. The liquidity on the foreign board is limited, because there are also limitations for foreigners as to how many shares of each company can be owned by non-Thai citizens. And, of course, some companies are completely off-limits. Specifically those crucial to certain sectors that might play a role in security and defense, or government related issues.
Investing on the foreign board restores some benefits, namely the eligibility to receive dividend payments. This is therefore obviously the only way how any foreigner living in Thailand should invest money. While I don’t care about the voting rights that much, I do appreciate regular dividends brushing up my account every now and then.
And it’s good that I don’t care about the voting rights, because I won’t get them anyway. There is a confusing document posted on the SET website. Moving to the Q&A section, it explains that “Foreign investors are entitled to the same voting rights as domestic investors provided that foreign investors hold shares designated for foreign investors on the book -closing date.”, only to follow up in the next question explaining that “foreigners will not be entitled to voting rights and financial benefits if they hold shares designated for local investors and will not be entitled to voting rights if they hold NVDR units“. NVDR stands for Non-Voting Depository Receipt, and it includes all shares that are listed on the foreign board.
As this is rather confusing, I checked with my bank directly and they told me that I won’t have any voting rights no matter on which board I buy my shares. So there you go.
How to buy shares of a company on the foreign board?
Now this is the easy part. To buy shares of a company on the foreign board, simply take the SET shortcut/abbreviation of the company, and add an -F to it.
Here is an example: When looking for shares of the digital infrastructure fund “DIF“, upon typing in the shortcut you will also find another one with the name “DIF-F“. This one represents equities of the same company available on the foreign board.
The hospital chain Bangkok Dusit Medical Services or “BDMS” can also be found under “BDMS-F“, which represents shares of the company on the foreign board. And so forth.
So when you trade with the Streaming App, it is indeed a pretty easy process to find the right equities on the right board, and thus to ensure that you not only can benefit from capital gains of your shares, but also receive dividend payments.
A word on taxes. As you might probably already know, there is no capital gains tax in Thailand. So when your equities appreciate in value and you decide to sell, you don’t need to worry about any tax being imposed on you. At least as long as your tax residence is in Thailand.
Dividends are being taxed at 10%. This will be automatically deducted by your bank, so when you receive the payout to your bank account, you don’t need to worry about anything. You also don’t need to put any of this on your tax declaration for the year. It’s all set and done. Easy and simple.
Other ways to get dividends
There are at least two other ways how you can invest in Thailand and receive dividend payments: ETFs and Mutual Funds. When you purchase any of those then there is no need to worry about domestic or foreign boards. All fund holders are entitled to, and receive dividend payments. Including foreigners. Again, a 10% tax will be deducted upon payout.
To learn more about ETFs in Thailand, take a look at my most recent article HERE.