Setting up a representative office in Thailand is a great way to explore the market and build relationships with local partners. It also allows you to gain insights into the market, which can help you develop innovative solutions and grow your business.
A foreign company must register its representative office with the Department of Business Development. It must submit a number of documents including a declaration that the director, applicant, or managers satisfy the requirements set out in Section 16.
A Representative Office is a legal entity set up by a foreign company to manage service businesses in Thailand on behalf of its head office or affiliated companies. It reports to the head office on business movement in Thailand and facilitates imports and exports of goods. It also promotes the products or services of its parent company.
It can have both Thai and foreign shareholders. It requires a minimum of 2 million baht in capital, 25% of which must be injected within the first six months after it is registered and the remaining 25 percent by the end of the third year.
The Foreign Investor should submit a letter of appointment from the mother company. It must include a declaration that the director, applicant, manager, or appointed representative satisfy all qualifications and don’t have any forbidden characteristics according to Section 16 of the Foreign Business Act. This must be certified and notarized by the Thai Consulate or Embassy.
In accordance with the Foreign Business Act, Representative Offices are considered service businesses and therefore do not generate income in Thailand. Hence, they are not subject to corporate income tax in Thailand except for deposit interest from funds remitted by the head office.
Representative offices can report back to the parent company on market trends, clients and suppliers in Thailand. They can also assist in sourcing and negotiate business terms.
However, it is important to note that a representative office can only engage in five business activities and is not allowed to earn any income from these activities. Furthermore, it is required to report to the parent company on a yearly basis.
A Representative Office is easier to set up than a Thai Limited Company, but it offers limited independence and liability. For example, the parent company will be liable for lawsuits filed against the Representative Office. It is also more difficult to transfer assets to the Representative Office.
Representative offices must register their foreign business license with the Department of Business Development (DBD) to obtain a permit to carry on activities in Thailand. The office must also open a bank account to manage expenses, and recruit staff complying with local labor laws.
The office is allowed to perform limited activities of a non-revenue nature. However, it is not allowed to accept purchase orders or make offers or negotiate to carry out business with persons or juristic entities in Thailand. All incomes and expenditures incurred by the Representative Office are liable to be taxed in accordance with the Revenue Code.
A manager for the Representative Office must be appointed and a power of attorney signed by a person who is a citizen or permanent resident of a country that has diplomatic relations with Thailand. In addition, a copy of the manager’s passport is required. Moreover, the Representative Office is only permitted to hire two foreign employees.
Although the United States and Thailand have a long-standing commercial relationship, foreign companies still face challenges in doing business in the country. This is largely due to differences in corporate laws, labor regulations, and environmental standards.
While it is not mandatory, insurance should be purchased when establishing a representative office in Thailand. This will protect your investment if any unfortunate event occurs. Medical care in the country is not cheap, so having a good policy will protect you and your family.
A rep office is not allowed to engage in profit-making activities, but does not pay tax in Thailand. The office is permitted to promote a company’s products and services in the country, keep records of import and export, and facilitate shipments on behalf of its parent entity. In addition, it can provide information to the public and find new partners in the country. Lastly, it can also help with regulatory affairs and customs clearance for imported goods.