Setting up a Representative Office in Thailand is an ideal option for foreign companies to explore the local market and conduct business research without registering a full-fledged subsidiary in Thailand.
Representative offices are strictly non-income-generating entities that can carry out certain business activities on behalf of the head office or affiliated companies.
What is a Representative Office?
A Representative Office is a business entity that manages service businesses on behalf of the head office or an affiliated company in another country. Representative offices are not able to generate income in Thailand, but they are allowed to carry out non-commercial activities such as market research and building the brand of the foreign company in Thailand.
Unlike a branch office or a limited company, a representative office is 100% owned by the parent foreign company and is not subject to corporate taxes. However, the Representative Office is still required to submit tax returns and audited financial statements.
Acclime will assist the foreign company in preparing the necessary documents for registering a Representative Office, including obtaining an official stamp from the Department of Business Development and notarizing and certifying the documents with a local Thai consulate or embassy. Once the documents are submitted, the department will issue a certificate of registration within two to four weeks.
How to Set Up a Representative Office in Thailand
A foreign company that wishes to explore the Thai market or allow its head office to liaise with business partners can choose to set up a Representative Office. This entity is 100 percent foreign-owned and does not require a Foreign Business License (FBL).
When setting up a Representative Office in Thailand, the applicant must submit several documents to the Department of Business Development including a letter of appointment from the parent company and the name of the local manager who will oversee day-to-day operations. A copy of the manager’s passport and proof of residence should also be submitted.
The representative office should engage in non-revenue generating activities and must be financially supported by its parent company. The Department of Business Development will issue a certificate within two to four weeks following the submission of all required documents. Currently, representative offices are not bound by the work permit ratio of one foreign employee for every four Thai employees and may be eligible to support more than two work permits.
A foreign company with a head office abroad can register a Representative Office in Thailand to perform market research and find new partners. The office is not permitted to generate income in the country and therefore does not have to pay corporate taxes.
However, the Representative Office is still required to file certain documents and meet minimum capital requirements. The Department of Business Development will usually issue a certificate within two to four weeks after submission of the required documents, which permits the Representative Office to start operating in the country.
The Representative Office is allowed to carry out only five activities and must provide its head office or affiliated companies with any information it gathers. It cannot accept purchasing orders or make offers to sell and may not negotiate for business with a juristic person established in the country. The Representative Office is not subject to corporate income tax, but must deposit the interest earned on remitted funds from the head office.
A Representative Office operates as a service business of its head office or group company in another country. It can only engage in non-revenue generating activities like market research, finding new partnerships, and other forms of information gathering.
It cannot accept purchasing orders or make offers for sales to individual or juristic persons in Thailand. All expenses and outgoings incurred by the RO are to be covered by its parent company. Therefore, it is not subject to corporate income tax in accordance with the Revenue Code except for deposit interest of remitted funds from the head office.
The Representative Office must hire a minimum number of foreign and Thai employees in compliance with local labor laws. It must also comply with the reporting and compliance obligations set forth by the Department of Business Development. This may include filing annual reports and/or fulfilling taxation obligations. Consultation with professionals specializing in Thailand business setup is advisable to ensure full compliance with all legal requirements.