Setting up a Representative Office in Thailand is an optimal option for companies seeking to study the local market with minimal risk. The Department of Business Development will typically issue a certificate between two and four weeks after submission of all documentation, permitting the office to begin operations.
A representative office may only engage in the following five permitted activities. Performing any activity outside of these parameters could result in the office losing its foreign business license.
Providing business activity reports to the headquarters is another legal responsibility of a representative office. Those reports must detail what the office has done and its impact on Thailand’s economy. Additionally, it must report back to the parent company what it has learned in Thailand that may help with future business decisions.
In some cases, a representative office may also be able to source goods and services for delivery from the country, saving main offices money on distribution costs. It can also perform quality and quantity inspections on merchandise before it is sent overseas.
Finally, a rep office can market or provide information about new products and services to the local market that the main office hasn’t yet offered in the area. This can be an important function for businesses looking to expand their presence in the nation’s growing economy.
To start a rep office, the foreign company must submit an application package to the Ministry of Commerce that includes incorporation documents, financial statements, and a letter from the head of the parent organization. A representative office must also remit the equivalent of 3 million baht in capital to cover its operational expenses. It must also file an affidavit on its important info and deliver a report on its chartered capital each year to Thai authorities. It must also supply a list of expected staff for the office.
Representative offices are able to conduct non-revenue-generating activities, which can include market research, sourcing of goods or services, quality and quantity inspections and controls, and coordinating activities with local customers. They are also able to promote the head office's products or services to Thai business partners. However, there are a number of restrictions on these activities that must be followed in order to avoid losing their license.
For example, the office cannot engage in any commercial contracts or activities on its own and must receive a subsidy from the parent company to cover its expenses in Thailand. Additionally, the office must maintain accounting records and submit auditor-confirmed reports to the Department of Business Development. The office must also have a registered address in Thailand and only be allowed to hire two foreign workers. In the case of a large international firm with many staff members, this could be a significant limitation.
If the office violates any of these limitations, it could face fines or even lose its status as a Representative Office. This makes it critical for companies to enlist the help of a firm like Siam Trade Development to set up a Representative Office in accordance with legal guidelines. By doing so, the company can monitor the local marketplace and collect valuable information while remaining compliant with local regulations.
While a Representative Office can provide a foreign company with an opportunity to enter the Thai market without having to invest in revenue-generating activities, this type of entity cannot directly engage in business contracts with local parties. Instead, it should serve as an intermediary and carry out certain tasks, such as sourcing goods or services for the main headquarters from suppliers in Thailand, promoting new products and services to potential customers or partners (without direct sales), conducting research, providing information or advice about the company's products to Thai companies or individuals, and reporting on its business activities to the parent office.
While this type of office is not required to pay corporate income tax, it must register for a tax identification number and report its income and audited financial statements annually to the government. In addition, it must transfer a specified amount of its capital funds into the head office's corporate bank account annually and submit proof of these transfers.
Although setting up a Rep Office in Thailand can be beneficial for a foreign company, the legal requirements are complex and establishing this entity requires careful planning. Pongpanich Accounting can take care of the entire process for you, from submitting necessary documents to registering your Rep Office with government agencies. Contact us today to get started. Our team is ready to help you expand your company in Thailand.
A representative office is a great way for companies with established headquarters in other countries to make a presence in Thailand. It offers a lot of the advantages of a limited company, such as having a local representative, but isn’t subject to corporate tax because it can’t generate revenue in Thailand.
Rep offices can do a few different things, including conducting market research, importing products for sale, coordinating activities with Thai customers or suppliers, and providing quality control services to other companies in the country. They can also promote their parent company’s products, but this is generally restricted to non-revenue generating activities.
In addition, a representative office can sign documents that contribute to the company’s operations, like a lease agreement or export documents. It can also assist with introducing new products to the local marketplace and provide advice to its parent company.
In order to set up a representative office, the foreign company must have a Letter of Appointment signed by the head of the main business. It should also include a copy of the company’s affidavit that states it has not conducted any illegal activities. Additionally, the foreign business must provide a minimum of 3 million baht that will be used as investment not paid up capital along with an application fee.