Establishing a Representative Office in Thailand is not without its challenges. It requires thorough research to assess the market, regulatory requirements, and costs.
Representative offices are strictly service businesses and cannot generate income, accept purchase orders, or negotiate business with any natural or juristic persons in Thailand. They also do not pay corporate income tax, except for deposit interest on remitted funds from the head office.
Obtaining a License
A Representative Office is a service business entity in Thailand that manages business activities for its head office or an affiliated company in different countries. It is not allowed to engage in revenue-generating operations.
The first step is to apply for a license through the Department of Business Development. The process can take up to a month depending on the department’s workload. Various documents must be submitted including the parent company’s certificate of incorporation, financial statements, and a letter of recommendation. A power of attorney is also required to authorize the foreign company’s representative in Thailand to act on its behalf.
Additionally, a signed declaration from the director of the foreign company must be provided that it does not have any forbidden characteristics according to the Foreign Business Act. Once the license is obtained, the company can move forward with registering the Representative Office in Thailand. Afterwards, it must hire employees in compliance with Thai labor laws and open a bank account to manage its expenses.
Setting Up the Office
Setting up a Representative Office in Thailand is relatively straightforward and less expensive than registering a branch or company limited. The process is typically completed within a few weeks and requires the following documentation:
A letter of authorization from the foreign parent company, signed by an authorized signatory. A copy of the incorporation declaration showing the company name, capital, purpose, directors and agent, along with the Notarized Power of Attorney if necessary.
A minimum of 3 million baht capital must be remitted to the country, with 25% paid up in the first three months of operation. The office must also have a Thai agent who will manage daily operations. Representative offices are not allowed to generate income or conduct sales activities, but they are permitted to perform service businesses such as providing advice to the head office about the market trend in the country. They are also exempt from corporate income tax if they do not earn income, but are required to register for taxes, including withholding tax on salaries.
Managing the Office
Multinational companies seek to establish their presence in different economic jurisdictions for market expansion and business growth. They may choose to set up branch, regional or representative offices depending on the type of business they are involved in. Representative offices are not allowed to earn income, and their operations are limited to conducting non-revenue generating activities such as market research, sourcing goods, quality control, and after-sales services.
The process of registering a representative office in Thailand can take as little as one week once all the necessary documents are submitted. These documents include the company’s certificate of incorporation, financial statements, and a letter of recommendation from the parent company.
In addition to these documents, the representative office must submit a report of its operations to the Department of Business Development on a yearly basis. The report should include the company’s name, capital, objects, location of operation, directors, and authorized signatories. It should also list the number of shareholders, their nationalities, and the share amounts they hold.
Managing Employees
While a representative office can employ up to two foreign staff members, all employees must comply with Thai labor laws. Additionally, they must obtain the proper work permits and visas. This process can take up to a week.
The director of the foreign company must submit a letter of appointment to appoint a local manager who will be responsible for running the representative office. The manager may be a Thai citizen or a foreigner. Documents showing the identity of the manager, along with a copy of their passport and non-immigrant visa, must be submitted.
The representative office must also submit a report of its business activities to the Department of Business Development. It must also maintain a minimum capital of 2 million baht. The capital must be remitted from the head office according to a predetermined schedule. Moreover, the representative office must register with the Tax Office and submit monthly returns and an audited financial statement to the Tax Office on a yearly basis.