A Representative Office is a popular choice for foreign companies wishing to explore the Thai market or allow their head office to engage with their business interests in Thailand. One of the key benefits of a Representative Office is the reduced requirements for supporting a foreign employees Work Permit, making it a great choice for companies looking to establish a presence in Thailand.
What is a Representative Office in Thailand?
A Representative Office in Thailand is an office established by a foreign company who wish to have a presence in Thailand without having to apply for the Foreign Business License. Representative Offices in Thailand are treated as the same entity as the parent company i.e. the Representative Office is not a separate entity from the head office, unlike a Limited Company. This has the effect of making the head office liable for the actions taken by the Representative Office in Thailand.
It is important to note that Representative Offices can only perform “non-income related activities” as permissible by Thai Law. Therefore, a Representative Office is not allowed to earn income in Thailand and can only undertake the following permitted activities:
● Training and development;
● Technical assistance;
● Financial management;
● Control of marketing and sales promotion planning;
● Product development; and
● Research and development.
What are the general characteristics of a Representative Office in Thailand?
As mentioned above, a Representative Office is only allowed to perform non-revenue-generating activities. Therefore, it can be considered as a service business in Thailand for its head office in another country. Representative Offices have no authority to accept/enter into purchase orders, make sales offers, or negotiate business terms with individuals or juristic persons in Thailand.
Since there is no income earned by the Representative Office, it is not subject to corporate income tax, as stipulated by the Revenue Code. However, Income Tax will be applied to the deposit interest of remitted funds from the head office. All expenditures and outgoings incurred by a Representative Office must be covered by its head office.
Representative Offices must have at least one manager employed to handle the day to day management of the Office. This representative must be appointed through a Letter of Appointment, which must be signed by the Director of the foreign entity. The appointed manager of the Representative Office will be responsible for all areas of the office. Please note that a declaration stating that the applicant, directors, managers, or staff employed by the Representative Office satisfy the requirements set out under Section 16 of the Foreign Business Act is required.
What are the minimum investment requirements for a Representative Office in Thailand?
Representative Offices require a minimum investment of 2 Million Baht. This investment must be made within the first 3 years of operations.
The capital can be paid as either a lump sum, or with the following minimum installments:
● 25% within the first 3 months of registration;
● 25% within the first year;
● 25% within the second year; and
● 25% within the third year.
Can I hire foreign staff?
Representative offices can hire foreign staff and more importantly, can take advantage of reduced requirements when compared to a standard Thai Limited Company. For example, a Thai Limited Company has the same minimum capital requirements but requires four Thai
employees for each foreign employee.
Representative Offices on the other hand are able to hire a foreign employee as long as the following criteria has been satisfied:
– 2 Million Baht which must be fully transferred into the Thai bank account of the Representative Office.
– One Thai employee is required to support the work permit.
– In order to hire a second foreign worker, another 2 million Baht (a total of 4 million Baht) will have to be transferred and a second Thai employee will need to be hired.
Key features of a Representative Office
|
Representative Office |
|
| Liability | No separate liability from the head office |
| Foreign Ownership | 100% |
| Thai to foreign employee ratio | 1:1 |
| Corporate income tax rate | No corporate income tax |
| Business Restrictions | Restricted to the business for which investment promotion is granted
Limited to 5 activities. Cannot generate income |
| Reporting and audits | Annual accounting audits |
Conclusion
A Representative Office is an excellent way for foreign investors to enter the Thai market without having to establish a subsidiary in Thailand. Representative Offices also offer various advantages for companies. Such advantages include, 100% foreign-ownership and not being subject to income tax
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