A Representative Office serves as a favored option among foreign enterprises seeking to venture into the Thai market or facilitate interaction between their headquarters and business endeavors in Thailand. Notably, its advantage lies in the minimized demands for securing work permits for foreign employees, rendering it an ideal selection for companies aiming to establish a foothold in Thailand.
What does a Thai representative office entail?
A Representative Office in Thailand serves as an establishment initiated by a foreign corporation seeking a Thai presence without the necessity of obtaining a Foreign Business License. Unlike a Limited Company, a Representative Office operates as an extension of the parent company, thereby rendering the head office accountable for the Representative Office’s activities in Thailand.
It is significant to remember that Representative Offices are only authorized by Thai law to carry out “non-income related activities.” As a result, a Representative Office is limited to the following authorized activities and is not permitted to generate revenue in Thailand:
● 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 are required to hire a manager to supervise the day-to-day activities of the Office.This representative must be named in a Letter of Appointment signed by the foreign organization’s director. The manager that is appointed will be in charge of all aspects of the Representative Office. It is important to note that a declaration confirming the applicant’s, directors’, managers’, or Representative Office staff members’ compliance with the provisions of 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?
In addition to hiring foreign employees, representative offices might benefit from less requirements than a typical Thai Limited Company. This is particularly significant.For instance, a Thai Limited Company needs four Thai employees for every international employee, although having the same minimum capital requirements.
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
