Representative offices manage service businesses in Thailand for a head office or an affiliated company in other countries. They are only allowed to perform non-revenue-generating activities and all expenditures must be borne by the head office.
They report on the business movements in Thailand to the head office and find services and products for the company. They are also exempt from income tax.
What is a Representative Office?
A Representative Office is a type of business structure in Thailand that allows a foreign company to operate in the country. It is a great option for companies that want to test the waters in the Thai market and provide support services to their head office.
A Rep Office is restricted to non-revenue generating activities and is not subject to corporate income tax in Thailand. However, the representative office must submit an annual report to the Ministry of Commerce.
Depending on the complexity of the application, it can take up to a month or more for a foreign company to set up a Rep Office in Thailand. The process is typically facilitated by a legal or consulting firm. It is important to ensure that all documentation is correct before filing as any errors could result in the application being rejected. Once the paperwork is filed, the Department of Business Development will usually issue a certificate within two to four weeks that permits the representative office to begin operations.
How to Set Up a Representative Office in Thailand
Setting up a Representative Office in Thailand can be a viable and strategic way for foreign companies to tap into the Thai market. However, it is important that the process is done properly to ensure compliance with Thai laws and regulations.
A Representative Office is permitted to conduct a wide range of activities, such as contacting customers/clients and entering into contracts. It can also conduct a variety of marketing activities in Thailand. However, it is not allowed to earn revenue or receive funds from invoices. It is required to report its business movements in Thailand to its head office.
Since a Representative Office does not generate income in Thailand, it is not subject to corporate income tax except for interest on remitted funds from the head office. Additionally, it does not have to comply with the quota of 4 Thai employees per 1 foreign employee that is required for limited companies in Thailand. This makes a Representative Office the fastest and easiest option for foreign companies to enter into the Thai market.
Requirements to Set Up a Representative Office in Thailand
Representative offices are a great way for foreign companies to explore the potential market of Thailand without having to invest in a full-fledged business entity. They can provide information about new products or services to the Thai market, report on the business movement in Thailand, facilitate import and export operations, as well as carry out market research activities. However, they cannot make sales or receive purchase orders.
In order to set up a Representative Office, the foreign company must file some documents with the Commercial Registrar. These documents must include the foreign head office’s name, capital, place, directors, and authorized signatories, as well as the financial statement of the past three years. In addition, the Representative Office must have a physical office in Thailand that is either rented or owned. It must also appoint a manager who lives in the country to manage the office. If the Representative Office engages in non-revenue generating activities and does not render services to individuals or juristic persons, it is exempt from corporate income tax.
Benefits of Setting Up a Representative Office in Thailand
Setting up a Representative Office in Thailand is a cost-effective and quick way for foreign businesses to explore the local market. It also allows companies to establish a presence in the country without having to comply with a wide range of legal and operational requirements that are typical for a fully-fledged subsidiary or branch office.
A Representative Office in Thailand can perform non-revenue-generating activities like market research, sourcing of goods, and quality control inspections for the head office to facilitate the company’s business in the country. However, the office cannot accept orders from customers or make offers to sell products, and it can only negotiate business with juristic persons established in Thailand.
The Representative Office must register with the Department of Commercial Registration, submitting a document that includes an overview of the company functions and reasons for establishing the office along with specific information on the physical office space. The company must also hire and train local employees, ensuring that they meet labor law compliance.
