A Representative Office allows foreign investors, who may be considering entering the Thai market, to evaluate potential market opportunities without the need to establish a subsidiary in Thailand. Its purpose is to provide services to its own foreign head office or related businesses. The services it can provide are limited it can only sign contracts that are essential for its own operations, such as, lease agreement. The operation of the Representative office must be completely financed by the foreign head office.
Restricted Scope Of Activities
Under Thai regulations, A Representative Office may only provide services and activities in these five categories. These are;
- to report the business movements in Thailand to the head office or affiliated company or the group company;
- to advise on various aspects on the goods distributed by the head office or affiliated company or the group company to the distributors or the users in Thailand;
- to seek for the supply source of products or services in Thailand for the head office or affiliated company or the group company;
- to inspect and control the quality and quantity of the goods that the head office or affiliated company or the group company purchased or hired to manufacture in Thailand;
- to disseminate the information about the new goods or services of the head office or affiliated company or the group company.
Forbidden Activities
Under no circumstances may a Representative Office Participate in the following activities or services;
- Purchase, order or pay goods on behalf of the head office or affiliated companies or any activities related to this.
- Receive purchase orders from any individual or juristic person.
- Provide after-sale-services concerning installation and maintenance.
- Provide advice concerning goods not produced or sold by the head office or affiliated companies.
- Sales offer for any natural or juristic person.
- Coordination of sales and purchases on behalf of the head office or affiliated companies.
- Provide information concerning goods that have already been sold in Thailand.
- Carry out activities as a middleman or agent between a customer in Thailand and the head office or affiliated companies.
- Plan and coordinate with any organization on behalf of the head office or affiliated companies.
- Representation of head office or affiliated companies regarding any contract negotiations or activities.
- Report information to any company that is not the head office or an affiliated company.
If the representative office engages in other activities for which permission is not granted, such as buying or selling goods on behalf of the head office, it will be regarded as doing business in Thailand and may be subject to taxation on all income received from Thailand, prosecution for violating the Civil & Commercial code, expulsion of the company and its representatives from Thailand or all three.
Important Notes About A Rep Office
- No Foreign Business License: As a non-business organization, the five allowed activities as mentioned above do not qualify as “other services” in the meaning of the Foreign Business Act. Therefore, there is no legal requirement to apply for a Foreign Business License to set-up a representative office in Thailand. This legal viewpoint has been confirmed by a ministerial regulation of the Ministry of Commerce, effective from June 9, 2017.
- Capital requirements: Certain capital amounts have to be remitted from the head office into Thailand. This is a sensitive task which needs special know-how to do it most efficiently.
- DBD registration: The Representative Office has to be properly registered at the Ministry of Commerce (Department of Business Development), obtains a 13-digit registration number and has the same reporting requirements as a corporation. The registrar requires;
- information and documents regarding the head office and its shareholders,
- office address, employment details, etc.,
- business plan, financial forecast, and similar information, as well as
- additional data and documents to be coordinated with the authorities on a case-by-case basis.
- Representative officer: There are certain requirements for the appointed representative officer of the head office in Thailand regarding;
- qualifications,
- residence in Thailand, and
- employment arrangements.
- Work permit: Foreigners working in Thailand require a valid work permit which is issued on a yearly basis. Deviating from the 4:1 quota for a Co., Ltd., the ratio is one Thai employee per one foreigner. The total number of possible work permits per representative office depends on the individual case and is subject to negotiation with the labor office. The typical work permit requirements have to be fulfilled in a slightly modified form.
Thailand’s work permit regime has been recently relaxed and there are some arguments and government statements that the (one) responsible officer does not need a work permit because he is exempted under Section 4 (8) of the Foreigners’ Working Management Emergency Decree Number 2, published on March 27, 2018. Due to the latest statements, such special exemption is not applicable to the representative office. - Tax registration: Even though they are not subject to taxation in Thailand, all representative offices are still required to obtain a tax registration and to submit tax returns to the Revenue Department.
Cross-border tax planning is an underestimated but often the paramount aspect of the structuring of a representative office in Thailand. - Accounting and audit: The representative office requires monthly accounting. The synchronization with the bookkeeping, financing, and other complex issues at the head office makes this task challenging.
The financial statements have to be audited by a qualified and licensed Thai auditor on a yearly basis. - Certain types of Representative Office require additional licenses or permission such as finance, security, and credit financier offices and foreign bank offices.
Requirements To Set Up A Represetative Office
General Requirements
- A minimum capital of 3 million THB must be brought into the country prior to the granting of the Representative Office. It shall be brought in as follows:
No less than 25% of 3 THB million must be remitted into the country within the first three months after approval.
During the same year, at least 50% of the capital must be remitted
The remainder of 25% of the capital must be remitted each year after that. - At least one Agent must be employed in the Branch Office in order to look after the management and day to day operations of the business.
- Every fiscal year, submission of taxes must be made consisting of the details of the business development, in report form, with financial reports and taxes to the Revenue Department.
Documemnts Required
- A copy of a certificate or evidence of the juristic person status containing particulars of the name, capital, paid-up capital, list of shareholders, objects, place of business, list of directors and signatories who are authorized to bind the juristic person (AFFIDAVIT) of the mother company applying for the Representative office.
- A letter of appointment of a representative issued by the authorized signatory under (1) as appointer of a representative to have charge of the business operations in Thailand on behalf of juristic person (POWER OF ATTORNEY).
- A copy of the passport, identification document for foreigners or identification card(s) of the representative appointed.
- Confirmation from the head office of the salary and other remuneration of the person in charge of the operations in Thailand.
- A copy of the house registration, a certificate of residence in the Kingdom or evidence of permission to enter the Kingdom for a temporary stay under the law on immigration of the representative appointed.
- A copy of the lease for the premises where the Rep Office will be located.
- A map indicating the approximate location of the place of business operation in Thailand.
- A power of attorney in the case where another person has been authorized to act on the applicant’s behalf.
Summary - Setting Up A Representative Office
So as you can see setting up a Representative Office in Thailand is rather simple BUT what type of activities it can engage in is rather limited. It is a great solution for a company looking to expand into Thailand but it is unsure if of the investment required and if Thailand is a good fit for the company. There are of course other corporate structures Foreign companies can subscribe to that will enable them to start doing business immediately.
For more information on setting up a Representative Office or on any other corporate setups or if you wish to consult with a corporate professional at PCS for FREE please don't hesitate to contact us by using the form below! We are looking forward to working with you.
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