Many years ago, if a client would have asked to us our opinion on setting up a representative office in Thailand, we would have advised our client not to do it. The reason is that before the companies needed to obtain a foreign business license to operate, and this would take an average of 6 months.
From our point of view, the competition to attract foreign investment among the different ASEAN countries, have pushed a change in the criteria in Thailand as the proceeding was too complex and long for the foreign companies.
Since 9th of June 2017 the representative offices do not require foreign business license to operate, what has shortened the timeframe considerably from the previous 6 months to the 5 working days of nowadays.
The regulations on representatives’ offices are on the List three of Foreign Business Act B.E. 2542 (A.D. 1999) complying the regulation of the Office of the Prime Minister in establishment of work permit and visa center number 3 B.E. 2544 (A.D. 2001). Although we should remind that the representative office cannot obtain direct profits in Thailand, they are allowed to carry 5 business activities such as:
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
As we said the proceeding is simpler than before and can be divided in two main stages:
A) Submission of documentation such as application, POA and copy of passports and affidavit among other documents and
B) Issuance of a registration number by DBD (a 13-digit registration number).
We would like to highlight here that the classic quota of 4 Thai per one foreigner does not apply here, as the foreigner will be able to obtain work permit and valid visa by hiring one Thai employee only.
Finally, on Taxation of the representative office, we must mention that although the representative office is not subject of Corporate Income Tax, the Thai regulator still requires the registration on CIT and of course the compliance on Withholding Tax.
Please contact our lawyers in Thailand at [email protected] for more information and legal advice on incorporating a Representative Office in Thailand.