A Representative Office is a service business that manages non-revenue-generating activities for its head office or affiliated companies in other countries. Representative offices don’t earn income, but they do have reporting and tax compliance obligations.
Several documents must be submitted to set up a Representative Office in Thailand. These include a letter of appointment signed by the director of the foreign company and a declaration that the directors, applicant, managers, or appointed representative satisfy Foreign Business Act requirements.
Capital Requirements
A Representative Office in Thailand is an extension of a foreign company and does not operate as a separate legal entity. It is not able to accept purchase orders; offer sales; engage in business negotiations, or generate any profit (it can only spend money within Thailand but cannot earn income). It must be financed entirely by the foreign head office.
To establish a Representative Office in Thailand, submit a letter of intent and business plan describing your intended activities. Additionally, you’ll need to provide a list of equipment and a statement of capital. Finally, submit a copy of the manager’s passport and any documents/certificates/papers proving they have power of attorney to run the Representative Office.
If you intend to hire staff at the Representative Office, you must apply for work permits and comply with Thai labor laws. In addition, you’ll need to open a bank account in Thailand through which the remittance of funds from your head office will be made.
Government Fees
A Representative Office is a cost-effective way for multinational companies to study the Thai market and conduct business support activities. However, it is not allowed to generate income in Thailand and must report to the parent company on its business movements in the country.
A minimum capital of 2 million baht is required to open a Representative Office in Thailand. 25% of this amount is required to be paid within the first three months, a further 25% by the end of the year, and the final 25% by the end of the third year.
The Representative Office is not subject to corporate income tax, except for deposit interest on remitted funds from the head office. However, it is required to submit annual audited financial statements and an annual report. It is also obligated to register with local tax offices and the Social Security Department. Our expert team can assist you with registering your Representative Office in Thailand.
Permitted Activities
As a non-trading entity, a Representative Office is limited in activities. However, it can source goods for the head office and its affiliated companies in Thailand. It can also perform inspection and quality control on goods that the head office manufactures in the country or purchased from third parties. It can give advice on products of the head office to customers and agents. Finally, it can propagate information regarding new products of the head office based on business trends.
Despite not generating revenue, the Representative Office must still obtain a corporate tax identification number and submit income tax returns along with audited financial statements. It also needs to set up a bank account, and it must have a place of business in the country. Our team can help with establishing a Representative Office or changing the business form if required. It can take as little as one week to get a Representative Office up and running.
Closing
Unless it carries out revenue-generating activities, a representative office is not subject to Thai corporate income tax. Nonetheless, it will still be required to file monthly returns and an annual audit.
Closing a representative office in Thailand can be relatively easy with the help of a trusted professional. Pongpanich Accounting can assist with the entire process and prepare all necessary documentation for submission.
Rep offices are a popular option for foreign companies seeking to explore the market in Thailand without incurring the high costs associated with incorporating a Thailand limited company registration. The main advantage of a rep office is that it can be 100% foreign-owned and will not be subject to corporate taxes.
Additionally, rep offices can hire foreign workers without having to comply with the stringent ratio of four Thai employees for every one work permit issued by a limited company. This can significantly reduce the overall cost of operations in the country. However, rep offices are restricted to non-revenue-generating activities and will be required to remit any earned funds back to their head office.