A Representative Office allows foreign companies to establish a presence in Thailand without requiring significant investment or immediate commercial operations. Its permitted non-income generating activities include market exploration, product ads, sourcing, quality control, and post-sales support.
Obtaining this type of business license requires submission of an affidavit and report on chartered capital from the parent company along with a list of expected staff. Lotus Ledger can help you with the entire process, including legal compliance.
A representative office in Thailand is an ideal option for companies that want to do market research and assess the business environment without investing heavily into a branch or subsidiary. It has low operational costs and reduces legal complexities, making it an effective stepping stone for larger businesses looking to enter the Thai market.
The Foreign Business Act delineates the primary provisions governing representative offices in Thailand. These include the requisite paperwork, local employment requirements, and limits on business activities. A representative office must be owned by a parent company and have at least one responsible manager with the appropriate work permit. The office must also submit an annual review to the Department of Business Development detailing its functions and finances. Representative offices are normally exempt from corporate income tax although withholding taxes for payments to workers and vendors may apply.
Other required paperwork includes a copy of the parent company’s certificate of incorporation and board resolutions authorizing the establishment of the office. A list of permitted office activities and the minimum required capitalization must be included as well. The office must also affix a notary seal to the required documents and file them with the Department of Business Development. Although there is no explicit requirement to hire a specific number of Thai employees, most companies find that having some local staff for research and liaising purposes is beneficial.
A Representative Office is the best option for foreign companies who wish to conduct market research or establish local relationships without committing to the expenses of a full branch or subsidiary. However, a Representative Office cannot engage in revenue-generating activities and must be managed by a director with broad power of attorney who is domiciled in Thailand. Furthermore, it must comply with all local employment and tax regulations, which can be a challenge for foreign business owners who don’t understand the Thai legal system. This is why many businesses choose to work with Plizz, a local partner that takes care of all the details for them.
Representative offices can perform limited non-revenue-generating services, such as sourcing products or services from the Thai market, shipping product to affiliated companies, acquiring purchase orders, and making payments. They are also permitted to report back to the head office or affiliate companies on business activities in Thailand. Since they don’t generate income, rep offices aren’t subject to corporate tax except for remitted funds from the head office in accordance with the Revenue Code’s specifics.
As a foreign company, you must appoint an official representative and provide a letter of consent from the parent company to establish your business in Thailand. You must also submit a detailed plan of the activities you intend to perform in the country and provide evidence that you have sufficient funding to operate your business.
A representative office is strictly non-commercial and cannot generate income. The only permitted activities include sourcing, quality control, customer advisory, and information dissemination. It can also conduct market research to collect business intelligence. The representative office can also sign contracts and other documents related to the business.
While a representative office can help a company establish a presence in Thailand, it's not a great option for businesses that want to engage in commercial activities. If a company wants to conduct direct revenue-generating activity, it should consider a limited Thai foreign-owned enterprise (LLC) or branch office structure.
Setting up a representative office is an easy way for a foreign company to establish a presence in Thailand, but it's important that the foreign company adhere to all laws and regulations. Failure to comply with the requirements can result in penalties or revocation of the office's license.
To set up a representative office, a foreign company must submit the following documents to the government of Thailand:
Compared to the liquidation and dissolution of a foreign business entity, closing down a representative office is relatively easy. However, it is important to make sure that all outstanding expenses are covered by the parent company before closing the office down. The parent company will also need to fulfill other involving obligations in compliance with applicable laws.
Another benefit of a representative office is that it can hire more foreign employees than a Thai limited company. This is because the required ratio of Thai to foreign staff is only 1:1, whereas a limited company must meet the higher quota of four Thais per one foreign employee.
Finally, a representative office can help a foreign company establish connections with local suppliers, distributors and customers. This can be especially helpful for companies that plan to expand their business in Thailand.
To open a representative office, the foreign company must submit several documents, including the company name, address, contact details, list of directors and authorized signatories, and a letter of purpose. The company must also show proof that it has sufficient working capital to support its operations. Furthermore, it must also provide a certified copy of the passport of its chosen representative. In addition, the office must have access to a physical location in the country where it plans to operate.