In the last couple of years, our law firm in Thailand have set up dozens of representative offices for foreign investors from all over the world. H&P lawyers in Bangkok have been witnesses of how representative offices have become an effective solution for entrepreneurs from an immigration and business perspective. The idea of exploring business opportunities in Thailand and comply with less strict immigration, tax and labor regulations in Thailand are very attractive for corporations looking to have a presence and basic legal structure in place in Thailand.
Based on our professional experience, assisting foreign clients to do business in Thailand, our corporate lawyers in Thailand have prepared this article to discuss the most relevant questions and answers regarding incorporating a representative office in Thailand.
Question: What is the meaning and scope of a representative office in Thailand?
Basically, the idea is that an overseas mother company registered in any jurisdiction outside of Thailand, appoint someone to represent their interests in Thailand.
The difference with the limited company is that the Representative office can not issue any invoice by itself, meaning that it is 100% owned and entirely financed by the foreign company.
Question: What is the timeframe to set up a representative office?
After we receive the legalized documents from the mother company, the timeframe is from 3 weeks to 4 weeks.
Before, in the past, it would take around 4 months as it was required Foreign Business License but now not anymore, so it is very fast and convenient for clients that want to proceed very fast and have a legal structure in place in Thailand.
Question: What type of activities can be carried under the umbrella of a Representative office in Thailand?
Based on the law, there are 5 business activities that can be carried as follows:
1)Sourcing of Goods and Services in Thailand for its head office
2)Checking and controlling the quality and quantity of goods purchased and services hired in Thailand by its head office
3)Advising Thai customers or agents regarding goods and services sold by its head office in Thailand
4)Informing customers regarding goods and services of its head office in Thailand
5)Reporting on business trends in Thailand to its head office
In practical the scope is wide, but the main restriction is that the representative office is unable to issue invoices to Thai or foreign clients.
Question: What is the minimum capitalization for a Thai representative office?
The mother company will need to transfer 2 million Thai Baht to the Rep office company account and it will be considered working capital. You do not need to keep it frozen in the bank account but you can use it the next day.
We advise H&P clients to capitalize at once or in three different installments. The minimum 25% of 2,000,000 within the first 3 months. The 50% of 2,000,000 within the 1st year. The following 2 years, the remaining of 2,000,000 should be completely transferred to Thai Bank.
Question: Is there any maximum number of foreigners working allowed under a representative office?
As most of the business people know, in a limited company the quota is 4 Thai per 1 foreigner, and this is sometimes a challenge for many start up. However, in a representative officer is only 1 Thai per foreigner. This can be very attractive for a new business in Thailand.
There is a maximum number of foreigners working under a representative office in Thailand depending on the type of business. If the representative office provides service/goods in Thailand to the Head Quarter: The maximum number of foreigners are 2 persons. On the other hand, if the representative office purchase service/goods in Thailand for the Head Quarter, then the maximum number of the foreigners are 5.
Question: After the representative office is incorporated in Thailand: What is the compliance in terms of accounting and tax?
The representative office is a legal entity registered at DBD so it requires a minimum of compliance.
From an accounting perspective, the representative office in Thailand would need to prepare and submit the annual financial statement report to the DBD within 30th May.
From a tax perspective, the representative office in Thailand would need to file the Tax as detail below:
WHT filing (PND1, 3, 53, 54 and PP36): monthly filing within 7th of the following month.
The Half Year Tax filing (PND51): the representative office would have to prepare and submit it to the Revenue Department within the end of August.
The Annual Tax filing (PND50): the representative office would have to prepare and submit it to the Revenue Department within the end of May.
Question: Is there any limitation in the amount of money brought to the Representative Office in Thailand?
No, there is no limitation of money brought to the Representative Office in Thailand, but the minimum is 2 million baht within the first three years of operations.
Question: Does the representative office need to be registered in VAT?
The representative office does not need to be VAT registered, because the representative office in Thailand cannot generate income or provide any service in Thailand.
However, the representative office needs to be registered in the Revenue Department using a physical address in Thailand. In practical, some of our clients use their own office but some of our clients, that do not require a physical office, they use H&P office as their address.
Question: What happens if the Thai employee resigns as an employee of the representative office?
There is not any effect if the Thai employee resigns from the representative office in Thailand but if there is a foreigner working in Thailand under the representative office, then the representative office needs to keep the quota of 1 Thai per 1 foreigner.
If you want to incorporate a representative office in Thailand, please contact our Thai lawyers and Foreign Legal Consultants at [email protected]
