Set Up a Representative Office is a business structure that allows a foreign company to evaluate the market in Thailand without paying corporate income taxes. However, it is limited to performing non-revenue-generating activities and cannot accept purchasing orders or make offers for sales.
Moreover, it must report back to its head office on the local business environment. It also has to adhere to Thai compliance and reporting regulations.
Representative offices manage service businesses in Thailand on behalf of their head office or affiliated companies in other countries. Unlike other business structures, they don’t generate income in the country and must remit all expenses to their head office. In addition, they are not subject to corporate taxes on their remitted revenue.
To set up a Rep Office, the parent company must submit various documents to the Ministry of Commerce. The documents include a declaration that the directors, applicants, and managers meet all requirements to operate the business. The documents must also be notarized and certified by the local Thai embassy or consulate.
The Rep Office must also provide annual reports to the parent company detailing its activities. It must also register with local government agencies. It can have up to three foreign employees and one Thai employee. The manager must have power of attorney to run the business and submit a copy of his or her passport along with proof of residence.
Establishing a representative office in Thailand can be a cost-effective method for a foreign company to explore the local market without incurring corporate tax liabilities. The office can engage in non-revenue-generating activities such as market research, coordination, and promotion of the parent company’s products or services.
Obtaining a license for a representative office is easy when you work with a professional firm like Konrad Legal. We start with a complimentary initial consultation to clarify the requirements and prerequisites for establishing a representative office in Thailand.
Generally, the representative office must be a service business and must manage the operations on behalf of the head office or an affiliated or group company in another country. The representative office can also report on business trends in Thailand to the head office. However, it cannot accept purchase orders or make an offer for sale; engage in any business negotiations; or generate income on its own account. It is required to remit funds for its operation in accordance with a predetermined schedule.
A Representative Office can be staffed by up to four foreign staff members. However, a foreign company must have an equal number of Thai employees to offset the ratio of foreign to Thai staff. Since a RO is not an income-generating business entity, it is exempt from corporate income tax. However, it must pay social security contributions for its employees.
The office can conduct market research and report to the head office on business movements in Thailand. It can also liaise between the parent company and local customers and distributors. However, it is not allowed to accept purchase orders or make sales or negotiate with individuals or juristic persons.
Setting up a Representative Office in Thailand requires careful planning and thorough documentation. A professional business law firm, like Konrad Legal, can help guide you through the process. Contact us today to schedule your initial consultation.
Setting up a representative office is the simplest and cheapest way for a foreign company to establish itself in Thailand. However, a representative office cannot engage in any revenue-generating activities and is subject to the restrictions of Thai law.
Permitted non-revenue-generating activities include market exploration, product promotion, sourcing, quality control and post-sales care. Prohibited undertakings include commercial exchanges, contracts and import/export operations. Representative offices also must adhere to labor protections and report income to the Department of Business Development.
In order to open a representative office, the parent company must transfer a minimum of 2 million baht into the rep office account in three different installments (25 percent in the first three months, 50 percent in the first year and 30 percent in the second year). The rep office is not required to hold any of this capital at the office and can invest it into its business operations in Thailand or keep it frozen for future use.