Maximizing Your Business in Thailand: Exploring the Benefits of a Representative Office
Opening a representative office can be smart if you’re a foreign company looking to establish a business presence in Thailand. But what exactly is a representative office, and what can you do from it? In this blog post, we’ll take a closer look at the benefits of setting up a representative office in Thailand and the activities and limitations that come with it.
Whether you’re considering expanding your operations to Thailand or just curious about the process, read on to learn more.
- Representative Offices cannot generate revenue and are fully funded by the head office in another country.
- Representative Offices can only conduct non-commercial activities.
- Advantages of having a Representative Office in Thailand include being 100% foreign-owned, reduced ratio for hiring foreign staff.
- A Representative Office is not a separate legal entity from its head office.
What is a Representative Office?
As a non-trading entity, a foreign company established a Representative Office in Thailand to provide non-commercial services, primarily promoting and representing its parent company.
Representative Offices cannot generate any revenue, and the head office in another country fully funds their expenses. The Representative Office in Thailand cannot engage in profit-making activities, such as:
- negotiating sales,
- Issuing invoices,
- receiving payment for services or;
- signing business agreements.
It is not subject to corporate income tax except for any interest earned on its deposits.
What business activities can a Representative Office do?
Here are some of the tasks that a Representative Office can undertake on behalf of its head office:
- Sourcing local goods or services in Thailand
- Inspecting and regulating the quality and quantity of items purchased by the head office in Thailand
- Disseminating information regarding the head office’s new products and services
- Reporting on local company development and activities to the corporate office
- Guiding distributors and consumers on a variety of topics related to items distributed by the head office
- Signing contracts that are necessary for the company’s activities, such as a lease
- Exporting products that are ordered by the company’s headquarters or related companies.
What are the advantages of a Representative Office?
A Representative Office in Thailand has some significant advantages that may interest potential businesses looking to set up an entity here.
100% Foreign Owned: A Representative Office is 100% owned by a foreign head office.
A reduced ratio for hiring foreign staff: A ratio of of 1:1 (1 Thai employee per foreign employee) must be satisfied when hiring foreign staff. In practice, Representative Offices can hire up to 3 foreign employees in practice.
Capital Requirements: A minimum capital requirement of 2,000,000 THB is required within the first 3 years. 25% of this capital (500,000 THB) is required within the first 3 months, a further 25% by the end of the first year, a further 25% by the end of the 2nd year, and the final 25% by the end of the third year.
A Representative Office in Thailand can offer several further advantages, including:
Cost-saving: A Representative Office is a cost-effective way to establish a business presence in Thailand without registering a company or branch office.
Market research: A Representative Office can conduct market research and provide valuable insights into the local business environment, which can help the head office to make informed decisions.
Access to local networks: A Representative Office can help the head office to establish contacts with local suppliers, distributors, and customers.
Representative Offices are not subject to corporate income tax: Representative Offices cannot generate income in Thailand and are therefore not required to pay corporate income tax.
Brand building: A Representative Office can help to build the company’s brand and reputation in Thailand.
What are the disadvantages of a Representative Office in Thailand?
There are some disadvantages of a Representative Office in Thailand, including:
Limited activities: Representative Offices are limited in their activities, such as the inability to engage in sales or revenue-generating activities. This can restrict the potential for business growth in Thailand.
No individual legal entity: A Representative Office is not separate from its head office, meaning it cannot enter into contracts or conduct legal proceedings in its own name. This can create complications in business operations.
Limited tax benefits: Although Representative Offices are exempt from corporate income tax, they are still subject to withholding tax and other taxes on certain payments, which can impact their financials.
How do I register a Representative Office in Thailand?
The registration process for a Representative Office in Thailand involves submitting specific documents to the Department of Business Development (DBD) in Bangkok or the Provincial Office of Business Development in other provinces. The following documents need to be submitted:
- An official document mentioning the company’s name, capital, objects, location of operation, list of directors and authorized signatories, and financial records for the previous three years.
- The total number of shareholders, their countries, and the number of shares they own.
- Office location in Thailand and confirmation of ownership or occupancy of the Representative Office’s office space.
- Employees’ numbers, names, and salaries
- Detailed explanation of the following:
- A business forecast for the following three years
- The type, size and intended period of the business
- The stages of operations
- The proposed machinery and/or office equipment to be used
- The impact on the Thai economy, what will the Representative Office add to the Thai economy?
- As estimation of the spending on fixed assets and operational expenses in Thailand for the first three years, as well as an estimation of the benefits of the Thai economy
- A plan for the import and transfer of foreign technology, and for research and development (if any)
- A declaration that the applicant, directors, managers, or appointed representative meet the requirements and do not have a forbidden characteristic under section 16 of the Foreign Business Act.
- A representative can be the authorised signatory in charge of business activities in Thailand. In that case, you must have a certificate of appointment, a copy of the chosen representative’s passport, and proof of his or her Thai residence (or evidence of permission to enter Thailand).
- A power of attorney to the person representing the applicant during the process (along with a copy of his or her passport, if appropriate). Moreover, if a power of attorney was signed outside of Thailand, the embassy should notarize or certify it.
After submitting the necessary documents to the Department of Business Development, the Representative Office can commence operations within two weeks in practice. Upon approval, a certificate or registration number is issued to the office.
How can Belaws help?
For more information about Representative Offices in Thailand, why not talk to one of our experts now?
This article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
How do I set up an office in Thailand?
To set up an office in Thailand, you can consider opening a representative office. A representative office is a non-trading entity established by a foreign company to provide non-commercial services, primarily promoting and representing its parent company. The process involves registering the representative office with the Department of Business Development (DBD) in Bangkok or the Provincial Office of Business Development in other provinces.
What is a representative office in Thailand?
A representative office in Thailand is a non-trading entity established by a foreign company to provide non-commercial services. Its primary purpose is to promote and represent its parent company. A representative office cannot engage in profit-making activities, such as negotiating sales, issuing invoices, receiving payment for services, or signing business agreements. It is fully funded by the head office in another country and cannot generate revenue. A representative office is not a separate legal entity from its head office.
How much does it cost to set up an office in Thailand?
The cost of setting up an office in Thailand depends on various factors, including the type of office and its specific requirements. For a representative office, there are certain capital requirements. A minimum capital of 2,000,000 THB is required within the first three years. This capital needs to be paid in installments, with 25% (500,000 THB) required within the first three months, another 25% by the end of the first year, another 25% by the end of the second year, and the final 25% by the end of the third year.
What is the establishment of a representative office in Thailand?
The establishment of a representative office in Thailand refers to the process of setting up a non-trading entity by a foreign company to represent and promote its parent company. A representative office is not allowed to engage in profit-making activities but can undertake various non-commercial tasks on behalf of the head office. These activities may include sourcing local goods or services, inspecting and regulating the quality and quantity of purchased items, disseminating information about the parent company’s products and services, reporting on local company development, guiding distributors and consumers, signing necessary contracts, and exporting products ordered by the headquarters or related companies.
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