A Branch Office is a great way for foreign companies to enter the Thai market with a 100% foreign owned vehicle and earn revenue from their derived business. One major advantage to opening a Branch Office in Thailand is the reduced ratio of 1 Thai employee for every 1 foreign employee hired needed in order to support a work permit. This is significantly lower than that of a Thai limited company which has the ratio of 4 Thai employees for every 1 foreigner hired. Branch Offices can perform different types of business in Thailand, but some activities may fall under the ‘restricted business’ category, if so a Foreign Business License would be required (which is the case in most situations).
Branch Office in Thailand at a glance
100% owned by the parent company (head office)
2 million Baht over 3 years for unrestricted business. 3 million Baht over 3 years for restricted business.
Corporate Income Tax rate of 20%
Ratio of 1 Thai employee per foreign employee.
Able to conduct various activities regardless of whether or not they generate any income. If the business is considered to be a ‘restricted business’ under the Foreign Business Act, B.E. 2542, a Foreign Business License (FBL) must be obtained from the Ministry of Commerce. If the business is not considered a restricted business, a Foreign Business Licence is not required, but a Commercial Registration Certificate from the Ministry of Commerce would be needed.
What is a Branch Office?
Branch Office in Thailand
Under Thai law, a Branch Office is essentially a foreign company that registers its presence in Thailand as a branch. The Branch Office is not considered as a separate entity from the foreign company, therefore, is treated as the same entity as its parent. The head office is liable for any actions taken by the Branch Office in Thailand.
Contrary to a Representative Office, a Branch Office may generate profit for the parent company. Branch Offices are governed by Section 17, List 3 (21) other business services of the Foreign Business Act B.E. 2542. The Foreign Business Act sets out the areas of the Thai Market that a Branch Office can operate in as either a restricted or unrestricted business. If the business to be operated is not restricted under the Foreign Business Act, all that is required is a commercial registration certificate from the Ministry of Commerce. However, if the business to be operated is considered as a restricted business under the Foreign Business Act, a Foreign Business Licence must be obtained from the Ministry of Commerce. As services activities are restricted under the FBA, a FBL will usually be required to open a Branch office.
A minimum capital of 2 million Baht for an unrestricted business and 3 million Baht for a restricted business is required. The minimum installments are as follows:
- No Less than 25% of 2 million Baht (3 million for restricted) must be transferred into the country within the first 3 months after approval.
- During the same year, at least 50% of the capital must be transferred.
- The remainder of the 25% of the capital must be transferred each year after that.
To hire a foreign employee, 3 million Baht must be fully transferred into the Thai bank account of the Representative Office and one Thai employee is required to support the work permit. To hire a second foreigner, another 3 million Baht (a total of 6 million Baht) will have to be transferred and so on.
What are the advantages of a Branch Office in Thailand?
Advantages of a Branch Office
There are 2 clear advantages to setting up a Branch Office in Thailand. Firstly, the lower requirements needed to obtain a work permit . Secondly, the ability to generate income in Thailand without having to set up a Joint Venture with a local partner.
As the Representative Office cannot generate income in Thailand, it is not subject to corporate income tax. However, the employees are still subject to the personal income withholding tax on their salaries.
Branch Offices are able to support one work permit per foreign employee with only one Thai employee (the ratio for a limited company is 4 Thai employees per foreign employee except if the company has obtained a promotion from the Board of Investment).
As the Branch Office is able to generate income in Thailand, it is subject to corporate income tax (20%). The employees are also still subject to the personal income withholding tax on their salaries, this also applies to normal Thai companies as well.
How to obtain a work permit for a Branch Office?
Work Permit for a Branch Office
Work Permit for the authorized director of a Representative Office
The foreign authorized director of a Branch Office must obtain a work permit unless the Branch office holds a Foreign Business License. If the Branch Office is considered restricted under the Foreign Business Act, a Foreign Business License will be required anyway. Obtaining a Foreign Business License usually takes between 4 to 6 months and requires a minimum capital investment of 3 million Baht, as opposed to the 2 million Baht required for an unrestricted business.
Work Permit for the director and employees of a Branch Office
To support a work permit for a Branch Office in Thailand, there is a minimum of 3 million Baht and one Thai employee.
What is the process to register a Branch Office in Thailand?
Registration of a Branch Office
Step 1: Collecting documents and filing the application
Documents from the parent company (foreign head office):The certificate of incorporation, articles of associations (bylaws) and financial statements. If those documents are not issued in English, a notarized english translation will be required.
Information on the Branch Office:
- A copy of a certificate or evidence of juristic person status containing particulars of the company’s name, registered capital, business objectives, official place of business, list of members of the board of directors and authorized signatories of the juristic person
- A letter of appointment of an individual in Thailand (may be a foreigner or Thai national) issued by the authorized signatory of the foreign juristic person for appointment as the agent to be in charge of the operations of the branch in Thailand on behalf of the juristic person
- A copy of the appointed individual’s passport, identification document for foreigners or identification card as well as house registration or certificate of residence in Thailand, or evidence of permission to enter Thailand for temporary stay under the immigration laws
- A declaration by the foreign juristic person certifying that the applicant, directors, managers and appointed individual satisfy the qualifications and do not possess any prohibited characteristics under section 16 of the Foreign Business Act, B.E. 2542 (1999)
- A map indicating the approximate location of the place of business operation in Thailand
- A power of attorney in the case where another person has been authorized to act on the applicants behalf for establishment of the Branch Office in Thailand
- Other evidence or documents, such as confirmation from the head office of the salary and other remuneration of the person in charge of the operations in Thailand, the head office’s annual audited financial report for the last three years, and so forth
- A declaration detailing the type of business for which a license application is made to establish the branch.
The application is submitted in Thai language.
Step 2: Registration of the Branch Office with the Revenue Department
Step 3: Post-registration duties
A resident representative should be appointed to deal with the tax authorities
Opening a bank account in Thailand and remitting at least 25% of the 3 million Baht required within the first 3 months. he process to open a bank account should be started promptly after the registration as it can take a few weeks, especially when the documents of the head office are not issued in English (the bank will check the information of the parent company).
If you need a foreign employee: transfer 3,000,000 Baht to the Thai bank account of the Branch office and hire one Thai employee to support the work permit.
Maintaining monthly accounting, annual tax filing and audit.
2 to 3 weeks* to open the bank account
2 weeks* to obtain a work permit
Branch Office vs Representative Office
Both Branch Offices and Representative Offices have the ratio of 1 Thai employee per foreign employee. However, unlike the Representative Office, a Branch Office is not restricted in the activities it can undertake, and can also earn revenue.
|Representative Office||Branch Office|
|Thai to foreign employee ratio|
|Corporate income tax rate|
|Reporting and audits|
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