Setting up a Representative Office in Thailand is a great way for multinational companies to mark their presence in the country. This type of entity allows for a wider scope of marketing activities without having to register as a Foreign Business Company.
Representative offices manage service businesses on behalf of a head office, affiliated company, or group of companies in a foreign country and do not generate income in Thailand. We can assist in preparing and filing the necessary documents for this type of entity.
Registration of Representative Office
In our professional opinion, it is always advisable for multinational companies seeking to expand into the Thai market, to first establish a Representative Office and only afterward incorporate a limited company in Thailand. This will allow the entrepreneur to gain some insight into the local business trends, to assess if a rep office is actually warranted or if an entity that can be set up quicker such as a limited company is more appropriate and cost-efficient.
Representative offices are not subject to corporate income tax and they can also take advantage of reduced requirements for work permits. Representative offices are allowed to hire up to two foreign employees.
A copy of the passport and a non-immigrant visa for the manager of the office must be provided, along with documents/certificates/papers showing that the manager will have sufficient power of attorney to run the company (if the manager is a Thai citizen then a copy of their national ID along with household registration should also be submitted). DBD issues a certificate or registration number after all of the documentation has been submitted.
Taxes
Setting up a Representative Office is the easiest way for foreign companies to establish a presence in Thailand. This type of legal entity is strictly non-trading and cannot accept purchase orders or offer sales to the Thai market. It can however facilitate the application for work permits for the directors and staff.
In order to set up a Representative Office, the foreign parent company must submit several documents to the Department of Business Development. This includes an affidavit that includes information about the company and its directors. It must also grant power of attorney to the representative.
The Representative Office is not subject to taxes unless it receives income from its activities in Thailand. This is unlike a Branch or Company Limited, which must pay corporate tax. In addition, a Representative Office can only engage in specific non-revenue-generating activities while a Branch or Company Limited is presupposed to be profit-seeking. These restrictions make the latter more attractive to investors.
Employment
A representative office is a great option for companies that want to do business in Thailand but are not ready to open a limited company. It is a foreign-owned entity and follows the same requirements for working permits as other businesses in the country.
The office will study commercial information about the country and report it back to its head office overseas. It also carries out market research to understand the market before introducing a product in the country. Additionally, it can promote goods at trade fairs on behalf of the head office.
However, the office cannot accept purchase orders or enter into business negotiations with third parties. All expenditures incurred by the office must be covered by its parent company. In addition, it is not liable for corporate income tax as it does not earn any revenue. It can, however, pay interest on remitted funds from the head office. It can employ a maximum of two foreign employees but must follow the quota of 4 Thai workers per one foreign worker.
Requirements for Representative Office
Representative offices are a great way for foreign companies to get into the Thai market without having to worry about profit-generating activities. They are also usually easier to register than a branch or a company limited.
However, there are certain requirements that need to be met to ensure the smooth operation of the office in Thailand. These include:
- The representative office must have at least one manager to handle the day-to-day management of the office.
- The manager must be a member of the foreign head office or an affiliated company.
- The minimum investment requirement is 3 Million Baht.
In addition to this, the Representative Office must provide a letter of authorization from the head office or an affiliate along with financial statements from the head office/affiliated company. The office must also submit a list of machinery and equipment that will be used as well as an office forecast for the first three years.
