A representative office manages service businesses for the head company or a group of companies. It does not derive income in Thailand, but it must report its activities and submit audited financial statements.
It can source regional products for the headquarters, and it can perform quality and quantity checks of the goods purchased. However, it cannot sale or negotiate business with natural persons.
Boost Your Brand Visibility and Reputation
Typically, a foreign company that wishes to explore the Thai market but is not ready to commit to setting up a branch office or a subsidiary can establish a Representative Office in Thailand. This is a non-trading entity that can only conduct non-commercial activities and is fully funded by the head office in another country. It is not subject to corporate income tax except for interest earned on deposits.
A representative office is considered to be a single legal entity and therefore, the actions of the rep office would bind the foreign company to third parties as a matter of law unless the head office explicitly disavows the actions. Setting up a Representative Office usually takes about one week. A letter of appointment must be prepared and signed by the Director of the foreign company to appoint the local manager who will handle day-to-day operations. A minimum capital influx of 25 percent must be made within six months of the establishment of the office, and the remainder must be injected in the following years.
Attract Foreign Investment
Foreign companies that are interested in exploring the Thai market but do not wish to start a full-fledged business entity can consider setting up a Representative Office. This entity can conduct non-revenue-generating activities but must abide by a set of limitations. For instance, it cannot accept purchase orders or make offers for selling products. It also cannot negotiate business with juristic persons established in Thailand. Furthermore, the Representative Office cannot charge for services such as shipping or maintenance.
It can also carry out inspections and quality control for goods manufactured or sourced in Thailand and report back to the company’s headquarters. This way, the company can make more informed decisions regarding its future expansion plans. In addition, a Representative Office does not need to comply with the work permit ratio of one foreign worker per four Thai workers. This makes it an attractive option for many companies looking to explore the Thai market.
Ensure Compliance with Local Laws and Regulations
Having a representative office in Thailand can be a good way for foreign investors to study the local market without having to set up a company. A Representative Office is not a trading entity and cannot generate income, but it can carry out non-trading activities such as managing service businesses in the country on behalf of its head office or an affiliated or group company in another country.
In order to establish a Representative Office, a foreign company must submit the following documents to the Department of Business Development:
An incorporation declaration that shows the company’s name, capital, objects, and location of operation. A list of directors and authorized signatories. A notarized power of attorney from the agent, which can be either a Thai national or a foreigner, who will manage the daily operations of the representative office. A copy of the passport of the representative, which must be notarized and certified by a Thai consulate or embassy. Once the complete set of documents is submitted, the Department of Business Development will issue a certificate or registration number within 2 to 4 weeks.
Boost Your Business Expansion
Setting up a representative office is a cost-effective way for foreign businesses to expand into the Thai market. It is also less complex and costly than establishing a branch or subsidiary. It also ensures that your business’ operations in Thailand are compliant with local laws and regulations, minimizing legal pitfalls and keeping you up to date on changes in the Thai business landscape.
Representative offices in Thailand are allowed to engage in limited activities, including carrying out market research, promoting products and services, and liaising with clients, but they cannot generate revenue or own assets. They are required to submit a minimum capital of 2 million baht within three years and must report their earnings to the Department of Business Development.
The first step to establishing a representative office in Thailand is to conduct a thorough feasibility study. Contact a professional service provider with expertise in business startup consulting to help you navigate the process and ensure compliance with local law.