A representative office is a legal entity that allows a foreign company to establish a presence in Thailand. It can conduct specific non-revenue-generating activities such as market research and business liaison.
However, the representative office cannot accept purchase orders or make sales offers and must fund all expenses from its head office. It must also file annual income tax returns and audited financial statements.
What is a Representative Office?
A Representative Office in Thailand is a legal entity that acts as an extension of a parent company in another country. It can be used for market research, building local relationships and brand awareness. However, it cannot sell products or sign contracts. Representative offices are different from subsidiaries, which operate as separate entities and incur their own debts and financial obligations.
Representative offices are not subject to corporate tax as long as they do not engage in any forbidden activities and the funds that they receive from their head office are used exclusively for those purposes. They must also file an affidavit that states that they are representing the parent company and that the work they perform is not for profit.
The representative office can only solicit business for the parent company and provide information and research services on behalf of the head office. It can also conduct back-office operations and serve as a regional administrative office. However, it cannot engage in banking transactions, such as preparing loan applications, soliciting business, the purchase and sale of securities and funds, or accepting deposits.
If you are considering expanding into a new country, setting up a representative office is a great way to test the waters without making the commitment of opening a full-fledged subsidiary. It is a low-risk way to gain a foothold in the market and lay the foundation for your future global strategy.
Purpose of a Representative Office
A Representative Office is the simplest way to establish a business presence in a new country. It’s often used for market research, building local relationships, and raising brand awareness. However, a Representative Office can’t sign contracts or generate revenue – it’s strictly a non-commercial entity.
A local manager is responsible for running the Representative Office on a day-to-day basis. This manager is hired by the parent company and must have a minimum of two years’ experience in managing similar types of businesses in the home country. The Representative Office must have a local bank account and submit monthly financial statements to the parent company. The office must also pay employee withholding tax and payroll taxes for employees in Thailand.
The office must comply with all foreign investment regulations in the host country, including labor laws and visa requirements. It must also register with the local government and submit a letter of appointment signed by the director of the foreign company. In addition, the representative office must provide a declaration that its directors, applicants, managers, or appointed representatives satisfy the requirements stipulated in section 16 of the Foreign Business Act.
A Representative Office can only perform services specified in list three of the Foreign Business Act, but cannot make profits or generate income. The office cannot invest in assets in the host country or enter into purchase orders or sales offers with individuals or juristic persons in Thailand.
Legal Requirements for a Representative Office
A Representative Office is a legal entity established by foreign companies that wish to establish their presence in Thailand without needing to secure a Foreign Business License. It can perform limited functions, including market research, sourcing, and liaison activities, but it is not allowed to generate revenue or conduct any commercial trading.
The Representative Office is considered a service business and does not pay corporate taxes, although it must register with the Tax Department. It must also obtain a tax identification number and file annual income tax returns with the Tax Department. It must also submit audited financial statements to the authorities.
It can only employ Thai nationals who have a work permit issued by the Ministry of Labor. However, it is not required to follow the same ratio of employing four Thai employees for every foreign employee as a Thailand Limited Company would be required to do.
A Representative Office is an ideal option for foreign firms that want to explore opportunities in the country without going through the complexities of setting up a limited company or subsidiary. Plizz can assist with the whole process, from deciding what type of Representative Office is needed to handling the paperwork and submitting it to the right departments. Our local experts can ensure that the entire process is done correctly and efficiently.
Costs of a Representative Office
A Representative Office is a great option for foreign companies that want to test the waters in Thailand without going through the lengthy and expensive process of registering a Limited Company or obtaining a Foreign Business License. This legal entity is allowed to conduct specific non-revenue-generating activities, including sourcing goods and services in Thailand, conducting market research, and establishing local networks.
However, it cannot accept purchase orders, make sales offers or negotiate business terms with third parties, and all expenses must be covered by the head office in other countries. It may also provide advisory or technical support to local distributors or customers regarding products sold by the head office abroad, but it cannot charge for these services.
Setting up a Representative Office is relatively simple and can be completed in as little as one week. The Director of the main business must create a Letter of Appointment to name a manager who will be in charge of the office. This manager must have a passport and a verified business address. A notarized copy of the company affidavit must also be provided. Additionally, a declaration that the applicant and any directors, managers, or staff members of the Representative Office comply with the Foreign Business Act must be submitted.
If you are interested in setting up a Representative Office in Thailand, Plizz can help. Our team of experts can handle all the paperwork and submissions, making it easy for you to establish your business presence in Thailand. Contact us now to get started.
