Representative Office Vs Branch Office in Thailand
When considering establishing a new entity for your business in Thailand, there are a couple of feasible options available to your business. While the most popular choice of business structure is a Limited Company, Representative and Branch Offices provide an interesting alternative. In this article we will take a look at the differences between both of these structures.
Both Branch Offices and Representative Offices are governed by Section 17, List 3 (21) – other business services, of the Foreign Business Act B.E. 2542 (FBA). There are, however, some important differences you need to consider before deciding which is the best choice for your company.
A Representative Office would be an ideal choice for any international companies who wish to have a presence in Thailand without having to apply for a Foreign Business License.
However, a Representative Office can only perform “non-income related activities” as permissible by laws. Therefore, the Representative Office is not allowed to earn income in Thailand. The permitted activities for a Registered Office are as follows:
- Training and development;
- Technical assistance;
- Financial management;
- Control of marketing and sales promotion planning;
- Product development; and
- Research and development.
In order to establish a Representative office, a minimum capital amount of 2 million Baht is required, as per the FBA.
Payment for the capital can be made as either a lump sum, or by paying in instalments as follows:
- 25% within the first 3 months of registration;
- 25% within the first year;
- 25% within the second year; and
- 25% within the third year.
Click here to learn more about how to register a Representative Office in Thailand.
Contrary to the Representative Office, a Branch Office can perform any “income-related activity” in Thailand on behalf of its head office.
If the business is considered to be a ‘restricted business’ under the FBA, which in most cases it will be, a Foreign Business License 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.
The required minimum capital amount for a Branch Office is 3 million Thai Baht for restricted businesses and 2 million Thai Baht for non-restricted businesses.
It is also important to note that the rules governing the activities of a Branch Office are the same as the rules governing the activities of a foreign held limited company.
The registration process of the Branch Office could also be significantly longer than that of a Representative Office. Please click here to learn more about how to register a Branch Office in Thailand.
Both Representative Offices and Branch Offices can hire foreigners. Both options have a Thai to Foreign Worker Ratio of 1:1, this is significantly lower than that of a Thai limited company (4:1) and is clearly a very attractive advantage.
As we can see, the main differences between a Representative Office and a Branch Office comes down to the ability to earn revenue for the company. A Representative Office cannot earn revenue in Thailand, whereas a Branch Office can. However, Branch Offices require either a Foreign Business License or a Commercial Registration Certificate in order to operate, whereas a Representative Office does not require either.
For a more precise summary of the comparisons between both a Representative Office and a Branch Office, please take a look at the table below:
|Representative Office||Branch Office|
|Liability||No separate liability from the head office||No separate liability from the head office|
|Thai to foreign employee ratio||1:1||1:1|
|Corporate income tax rate||No corporate income tax||20%|
|Business Restrictions||Limited to 5 activities. Cannot generate income||Able to conduct non-restricted activities or activities for which a Foreign Business License has been issued|
|Reporting and audits||Annual accounting audits||Annual accounting audits|
|Timeline||1 week||Unrestricted business – 1 Week
Restricted business – 4 to 6 months
Please note that this article is for information purposes only and does not constitute legal advice.
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