Many foreign companies looking to enter the Thai market choose to set up a Representative Office. This allows them to conduct non-revenue generating activities in the country without having to establish a full business entity.
Representative offices are 100% foreign owned and don’t pay corporate taxes. However, they must meet staffing requirements and report annually.
A foreign company that wants to explore the potential of the Thai market without investing in a full-fledged business operation can establish a Representative Office. This type of entity carries out non-revenue-generating activities on behalf of the head office, such as conducting research and providing advice. It can also source and inspect products and provide quality control.
The first step is to complete a feasibility study. This will help determine the potential of the local market, legal and regulatory requirements, and cost considerations. It is also advisable to seek the assistance of a local law firm or accounting firm with expertise in setting up representative offices.
Once the feasibility study is completed, a foreign company must register its representative office with the Department of Business Development (DBD). It must also submit a letter of authorization from the head office and a list of authorized personnel. The office must also comply with Thai labor laws and obtain visas and work permits for foreign employees.
Choosing the Right Business Form
A Representative Office in Thailand is a great option for companies that want to establish a presence in the country without engaging in revenue-generating activities. However, setting up a Representative Office can be challenging for foreign companies because they have to find a local manager and complete a lot of paperwork.
The Representative Office is allowed to perform non-revenue-generating activities, including reporting on business movements in the country and establishing contacts with local customers and distributors. The office can also conduct market research and provide important support to the company’s headquarters.
The Representative Office must pay a fee when it starts operations and submit audited financial statements, even though it will not earn any income in the country. It can also hire employees, but any staff members must have taxpayer cards and be subject to personal income tax. It must also pay an annual fee to the Ministry of Commerce. It is not subject to corporate income tax with the exception of deposit interest from remitted funds.
Obtaining a License
Generally, a foreign parent company that wants to set up a Representative Office will submit the following documents to the Department of Business Development:
A certificate of incorporation and financial statements of the parent company. A letter of recommendation from the parent company’s director. A business plan outlining the intended activities of the Representative Office. A notarized power of attorney from the agent or principal manager who will manage the day-to-day operations of the Representative Office in Thailand.
A bank account for the Representative Office in Thailand through which it will receive remittances of funds to cover operating expenses. A work permit for any foreign staff (maximum of two) at the Representative Office. A tax ID and compliance with reporting obligations. A report to the head office on business movements in Thailand. The Rep Office can’t sell products directly or engage in business negotiations; but it can report on the market to help its parent company make better decisions about expanding into Thailand.
Choosing a Location
A representative office, also known as a rep-office or regional office, is the most common option for foreign companies to operate in Thailand. As a non-trading entity, this office cannot generate income in the country but can perform a number of limited business activities and report back to its head office on the market, clients and supply situation.
The process of establishing a representative office is relatively quick and easy. To set up this office, you will need to submit a number of documents, including the certificate of incorporation and financial statements from your parent company, a letter of recommendation from the company in question and power of attorney for the manager in Thailand (to be certified as true copies by the embassy or consulate). The branch does not require a Thai partner, unlike other types of businesses. Nevertheless, it is essential to choose an appropriate location for your office. This will influence the location of your employees, your ability to access your target markets and the cost of acquiring and maintaining office space in the country.