Setting Up a Thai Representative Office requires some important documents and considerations. Learn the minimum capital requirement, the taxation of a Representative Office in Thailand, and alternative types of business entities to incorporate in Thailand. We will also discuss the advantages and disadvantages of each type of entity. Choosing the right option for your company is essential for a successful startup.
If you are looking to set up a Thai representative office, there are several documents that you will need. Firstly, you must have a local manager who can fill out the paperwork and sign them. Once the paperwork has been completed, it will take about one week to open the representative office. Your representative office manager will need to show a power of attorney, national ID, and household registration.
A Thai representative office can enter into contracts on behalf of the head office. This means that it is able to do a range of activities, including purchasing goods and rendering services. It can even engage in construction and manufacturing. However, the laws of Thailand do not permit the representative office to sell things.
Minimum Amount of Capitalization
In order to establish a Thai representative office a foreign parent company must have a certain amount of registered capital. This capital has to be transferred to Thailand within a specific period of time. It is mandatory to transfer the first 25% of the required registered capital within the first three months of operation, the second half within the first year, and the remaining capital within the third year. The representative office must also hire at least one accountant in Thailand.
Once all required documents are submitted, the Business Development Department will issue a certificate and registration number. This certificate is free of charge. Once the registration number is obtained, a representative office must provide Baht three million in capital within six months. The Business Development Department will also advise the company on the best corporate structure, how to obtain the required capital, and shareholder requirements.
Taxation of a Representative Office
Representative Offices are required to pay tax in Thailand when they manage service businesses for a foreign company. These companies must invest at least 3 million THB in the establishment of the representative office and employ one representative. The representative office must also pay tax on salaries despite receiving no payment for its business activities.
Representative Offices can engage in limited non-trading activities, such as sourcing goods for the head office and inspecting the quality of those goods. They may also disseminate information about new products or services and report to the head office about the local development of the business. The representative office must also contribute to the head office’s working capital, like a branch.
Alternative to a Limited Company
The alternative to a Thai Limited Company for setting up a representative office in Thailand is a Foreign Representative Office (FRO). A FRO is owned and operated by a foreign company and does not require a Foreign Business License. As a result, it can only carry out cost-center activities, such as sourcing, quality control, customer support, and marketing. Besides, it cannot sign contracts or receive orders.
Alternatives to a Thai Limited Company for setting your representative office in Thailand are a good choice for foreign entrepreneurs who are not ready to incorporate a limited company in Thailand yet. Although they don’t carry out commercial activities, a representative office can be used as a branch office of a foreign company expanding its business in Thailand. However, to be able to legally operate in Thailand, the foreign head office must invest a specified amount of money in a branch office. The process of establishing a branch office can take between two to four months.