Without having to set up a subsidiary in Thailand, a representative office enables a foreign investor who may be considering joining the Thai market to assess prospective market opportunities. The goal is to offer services to the company’s international headquarters or affiliated companies. It is only permitted to sign contracts that are necessary for its own operations, such as lease agreements, so the services it can offer are restricted. It is not permitted to accept purchase orders, offer sales, engage in business negotiations, or even make a profit. The foreign head office is required to provide all operating funds for the Representative office.
Overview of a Representative Office in Thailand
It must be noted that a Representative Office is strictly subject to 5 activities performed on behalf of their foreign head offices as follows:
- finding regional suppliers of products or services
- monitoring and regulating the quality and quantity of items requested to be manufactured in Thailand or acquired there
- giving local distributors and consumers information about products that were purchased straight from the corporate office.
- Introducing fresh offerings from the headquarters
- reporting on business trends, developments, and operations in Thailand to the headquarters
- Since June 9, 2017, there is no longer a requirement for a foreign business license (the “Regulation”).
- Capital Requirements: A specific sum must be transferred from its head office abroad! Additionally, the minimum capital requirement has been reduced from THB 3,000,000 to THB 2,000,000 under the new Regulation.
- Registering a DBD: receiving a 13-digit registration number and being registered with the Department of Business Development of the Ministry of Commerce
- Reprographic Officer: meeting the conditions, which may include eligibility, residency in Thailand, work agreements, and occasionally supporting documentation
- Work Permit: The standard Thai to international employee ratio has been reduced from 4:1 to 1:1.
- Tax Registration: Even if they are exempt, they nevertheless need to register and provide returns to RD.
- Accounting must be done monthly, and an annual audit is required.
Today, a Representative Office can be established in one week as opposed to the three to four months it used to take to get official approval in the form of a Foreign Business License.
The following documents must be submitted to the Department of Business Development:
- Documents from the foreign head office that include the name, address, authorized signatories, capital, and financial statements for the previous three years.
- Number of shareholders, together with the number and nationality of shares held.
- Office location in Thailand, including a map and information about who owns or occupies the building (lease agreement)
- Number of employees, names, and salaries
- The purpose of the representative office
- Explaining the following:
- Business outlook for the next three years
- Type, Size, and Duration of Operation
- Operations Stages
- impact of the machinery and equipment used on the Thai economy
- Budget for the next three years
- Make preparations to import foreign technologies