Foreign investors who wish to open a 100% foreign-owned business in the Kingdom of Thailand have the option to register a representative office in Thailand. This is akin to establishing a non-trading legal vehicle with reference to a company’s main office located outside Thailand.
What is a Representative Office?
A representative office is a non-profit establishment as opposed to a commercial establishment. As a non-trading legal vehicle, a Representative Office is tasked to support the undertakings of the main company and its subsidiaries overseas, or in this case, in Thailand. In essence, a Representative Office cannot:
- Issue receipts or invoices for services to third parties and sale of goods
- Enter into a legal agreement with any third party
As a foreign business non-trading branch, a Representative Office is limited to the following services:
- Controlling and inspecting quality of goods purchased in Thailand by the main headquarters overseas
- Sourcing of services and goods in Thailand for the main headquarters.
- Circulating information about the main office’s new services and products.
- Gathering information and reporting on activities and development of local businesses
- Providing advice relating to products sold to customers and distributors.
The permitted scope of activities of a Representative Office is quite restricted. Aside from being constrained to take in purchase orders and sell, a Representative Office cannot enter into any kind of business negotiation with any juristic person or third person. The restrictions are income-draining on the part of the main headquarters, as all expenditures of the Representative Office are shouldered by the main headquarters. This office is not subjected to pay corporate income tax based on the provisions of the revenue code. However, the interest of the remitted funds to the main office is taxed. Lastly, the Office must prepare a financial statement from the Accounting Act.
Applying for a Representative Office
A foreign applicant opting to put up a Representative Office in Thailand is required to apply for a Foreign Business license. The application process requires that all documents to be submitted must be duly notarized at the Notary Public prior to submission to the Commercial Registrar. The requirements are:
- An affidavit that includes the name of the company, address, business registration number, date of registration, registered jurisdiction of the company.
- A complete list of the company’s directors, complete with their legal names, ages, nationalities, races, addresses, and their number of shares. Indication as to which directors have the influence to bind the company.
- Authenticated copy of the company’s Articles of Incorporation
- Authenticated copy of the company’s Articles of Association
- Company report on its working capital, number of shares and its value, amount of paid up capital stock.
- Complete list of the company’s shareholders and their number of shares
- Documents that support the limitation or the extent of the Representative Office manager’s power of attorney in running the business
Additional duly notarized documents are required for the complete and quick processing of the application for a Representative Office.
- Description of the company’s vision/mission in Thailand
- Validation of the necessity of putting up the Representative Office in Thailand
- Projection of the Representative Office’s impact on Thai society and economy
- The company’s financial report in the last three years, translated to Thai
- Complete list of employees, including their salaries
- Three-year projected expenses of the Representative Office
- Complete list of the office equipment and machinery.
The main headquarters must be committed to transfer a minimum of 5,000,000 Baht working capital into its Thailand Representative Office. During the first year of operation, a minimum of 2,000,000 Baht must be remitted. From then on, a minimum of 1,000,000 Baht is to be transferred to the Office in Thailand.
Particular types of Representative Office such as international business offices, foreign bank offices, security, finance, and credit finance officers, are required to obtain additional licenses or permits.
All applicants are required to fill the application form in print. It must be duly signed by the applicant or his designated appointee. If the power of attorney was executed outside Thailand, said power of attorney must be notarized in the said country, or by a legitimate official of the Royal Thai Embassy or Consulate in the said country. If the power of attorney was executed in Thailand, the non-resident applicant appointee must procure an authenticated photocopy of his passport, or temporary residence certificate. If signatures were procured in another country, certification of such signatures must be provided. If documentation is in a foreign language, correct Thai translation is required. Lastly, all submitted documents must be certified correct by the applicant.
If the application for a Registration Office is in Bangkok, the form and documents are to be submitted at the Department of Business Development, Ministry of Commerce. In other provinces in Thailand, application form and documents are to be submitted to the Provincial Office of the Business Development.