A Representative Office is an office established by a foreign company to conduct marketing and other non-transactional operations, generally in a country where a branch office or subsidiary is not warranted. It does not earn revenue.
Representative offices are not subject to corporate income tax, as all expenses and earnings are covered by the head office in accordance with the regulations.
Establishing a Representative Office
Foreign investors considering exploring the Thai market may want to set up a representative office. Also known as a branch office, this non-trading entity is not subject to corporate income tax if it does not generate any revenue.
A representative office manages a service business in Thailand for its head office, an affiliated company, or a group company in other countries. Its activities are restricted to reporting on the business trend in Thailand and helping the head office find suppliers and services in the country. It cannot accept purchase orders, make offers to sell, or negotiate business with juristic persons in the country.
Tila legal can assist in drafting the documents necessary for registering a representative office and ensuring compliance with local regulations. We can also help in finding appropriate office space, acquiring necessary infrastructure, hiring staff (including Thai and foreign employees), and obtaining work permits and visas. Additionally, we can ensure the representative office meets all reporting and compliance obligations.
The process to set up a representative office in Thailand may seem complex and time-consuming, but it can be an effective way for foreign companies to explore the Thai market without investing in full business operations. It is crucial to engage with a local legal or consulting firm to ensure the proper submission of documents and compliance with Thai laws.
The main requirements for setting up a representative office include:
Providing information and reports to the head office.
Conducting non-revenue-generating activities such as market research and finding new partnerships.
Restrictions on the representative office’s activities:
The representative office is not allowed to accept purchase orders, make sales offers, or negotiate business terms with any natural or juristic person in Thailand. The representative office is also not permitted to earn income or pay any taxes in Thailand. The representative office must receive funds from the head office to cover its expenses. The office must also comply with Thai labor and immigration laws.
Obtaining a License
A Representative Office is allowed to perform non-revenue-generating activities on behalf of its parent company or affiliated companies in other countries. It can perform research, market surveys, product promotion, sourcing and quality control of goods for the head office. However, it cannot accept purchase orders; make sales offers; or negotiate business with third parties. It can also report to its head office on movement of goods in Thailand.
The foreign company applying for a representative office must submit several documents to the Department of Business Development in Thailand. These include the certificate of incorporation, financial statements, a letter of recommendation from the parent company, and a power of attorney that empowers a person to represent the representative office during the registration process.
The representative office must also submit a budget for the first three years of operation and a copy of the lease agreement for the office space. It will be subject to a minimum capital requirement of 3 million baht.
Managing a Representative Office
A representative office allows a foreign company to conduct marketing and other non-operational activities in Thailand. It is a type of business entity that can be 100 percent foreign-owned and can perform various functions without the need to obtain a business license or pay corporate income tax in Thailand.
Rep offices are allowed to engage in only non-revenue generating activities. They cannot accept purchase orders or make offers for sales and can’t negotiate with any juristic person established in the country. They can, however, perform services like manufacturing, processing, and construction if they meet Thai laws and regulations.
It’s a good idea for companies that are considering entering the Thai market to establish a Representative Office in order to evaluate potential opportunities and understand the local marketplace. It can also help the head office identify new opportunities and report back to it accordingly. This can save a lot of time and money for the foreign company that would otherwise be spent on setting up a separate entity in Thailand to explore those opportunities.