A Representative Office is a Thai business entity which is responsible for non-expenditure activities of the Foreign company. It cannot generate income and its expenditures must be borne by the head office.
Setting up a Representative Office is much easier than incorporating a branch or limited company in Thailand. The Department of Business Development usually issues a certificate within two to four weeks.
A representative office of a foreign company can engage in a wide range of activities, like buying and selling goods and rendering services. It is not subject to corporate income tax, except for interest on funds it receives from the head office.
It is allowed to report on business movements in Thailand to the head office. It can also source products and services for the head office. This helps companies save money by eliminating the cost of importing raw materials.
The representative office needs to submit documents containing the company name, capital, place, directors and authorized signatories. It should also include a description of the reason to establish the Representative Office along with its estimated budget for the first three years. It should specify the number of foreign and Thai staff, nationalities and shareholdings. Additionally, the company must provide the work permit ratio of four Thai employees for every one foreign worker. The foreign head office must also certify that the representatives are qualified to manage the business activities of the Representative Office.
Requirements for a Local Manager
The representative office acts as a liaison between the company’s head office and its offices in other countries and does research for commercial information, advising the parent office of market trends. In addition, the representative office can do marketing and exhibit samples of goods at trade fairs for the parent company.
In the past, establishing a representative office was difficult because it required a Foreign Business License (FBL) that would take months to obtain. However, now the process is much easier for foreign companies wanting to establish a presence in Thailand.
To set up a representative office, the foreign company is required to submit certified copies of its articles of incorporation and power of attorney for the local manager. These documents should be notarized and/or certified by a Thai consulate or embassy abroad. Additionally, the passport and non-immigrant visa of the local manager must be provided. Upon submission, the Department of Business Development will issue a certificate for the representative office, enabling it to commence operations within two to four weeks.
Requirements for a License
Generally, foreign companies want to set up representative offices in Thailand for market research and business support. These offices can be 100 percent foreign-owned and are allowed to hire up to two work permit holders. However, they cannot earn revenue in Thailand and are not taxable.
In order to operate a representative office, the company must submit a letter from the head office that confirms its location and financial statement. It also needs to submit a notarized power of attorney for the manager and proof of identity.
A representative office in Thailand must have at least 2 million baht in capital. It also must not engage in any revenue-generating activities and can only provide services listed under List Three (21) of the Foreign Business Act. In addition, the representative office must remit money to its head office or affiliated company/group of companies. Moreover, it can only receive funds to cover expenses, and it has no authority to accept purchase orders or offer for sale or negotiate for carrying on business with any person or juristic person.
Requirements for a Business Address
Foreign companies that wish to conduct marketing and business support activities in Thailand without obtaining a foreign business license can establish a representative office. This type of office is not allowed to earn revenue and can only provide important information back to the company’s head office.
Requirements for a representative office include an application to the Ministry of Commerce. This must contain a declaration that the applicant and their directors satisfy the requirements of Section 16 of the Foreign Business Act. Additionally, a notarized power of attorney from the foreign head office to the local manager must be submitted.
A representative office must also submit a minimum capital infusion of either 3 million baht or 25% of the estimated expenses for its first three years of operation, whichever is higher. This must be brought/transferred into Thailand according to a predetermined schedule. This is an ideal option for foreign businesses that want to test the waters in the Thai market before incorporating a company limited.