A Representative Office is an interesting opportunity for undertaking business in Thailand. After replacing the Alien Business Act B.E. 2515 (A.D. 1972) with the Foreign Business Act B.E. 2542 (A.D.1999) a Representative Office is from now on not any more explicitly addressed under the law.
Nevertheless, it is still possible to establish a Representative Office by applying for a Representative Office as a "Service Business".
- Requirements for the Establishment
The application for establishing a Representative Office must be submitted to the Department of Business Development, Ministry of Commerce.
The following documents are required:
- Copy of Company Affidavit (or comparable document) showing juristic person status with particulars of name, registered capital, objectives, address, list of directors and signing authority
- Power of Attorney issued by the authorised person(s) of the juristic person appointing its representative(s) in Thailand
- Copy of passport or copy of identity card of the representative(s)
- Affidavit of the applicant stating that the applicant, its director(s), manager(s) or representative(s) are qualified and are not disqualified according to Section 16 of the Foreign Business Act B.E. 2542 (A.D. 1999)
- Letter describing detail of the business activities applying for licence
- Map showing roughly the location of its business operating place in Thailand
- Power of Attorney, in case other person(s) is/are authorised to act on its behalf
- Brochure of the parent company
- List of Thai customers
- Copies of Invoices issued by the parent company to Thai customers
If the approval is granted, the following conditions apply:
The total volume for the financing of the Representative Office must not exceed seven times the share capital of the parent company. The complete capital for the operation of the Representative Office must be transferred from the foreign country to Thailand and be of the total amount of at least 3 Million THB (approx. 70,000 Euro), 25% of which must be paid up upon the Foreign Business License for the Rep. Office has been issued. In total 50% must be paid up within the first year of operation. Thereafter, 25% needs to be paid up each year until the total amount has been fully paid up.
At least one person being responsible for the representation office must live in Thailand.
The approval will be granted for a period of time which is within the discretion of the Ministry of Commerce. Subsequently, an extension of this period can be granted, if a proper documentation proves that the business has been successful. Furthermore, it must be applied for a work permit for the foreign employees of the Representative Office.
Due to the fact that the Representative Office does not earn any income, it is not subject to the Thai Tax. Nevertheless, all employees who live in Thailand are obliged to pay income tax in Thailand.
Usually, the registration of a Representative Office takes 3 months from the submission of the required documents. However, depending on the workload and the questions the officer in charge may have, this could also take much longer.
- Limitation of a Foreigner's Business Activities
The business activities of a Representative Office are limited to the following activities.
- Sourcing of goods or services in Thailand for the head office
- Checking and controlling the quality and quantity of goods purchased or hired to manufacture in Thailand by the head office
- Giving advice concerning goods of the head office sold to agents or consumers
- Propagation of information concerning new goods or services of the head office
- Report on business trends in Thailand to the head office
Accordingly, a Representative Office is not permitted to conduct its own business. It is only allowed to carry out business for the parent company but is not allowed to gain income from its activities within Thailand.
- Costs of Maintenance
Due to the fact that the Representative Office is not permitted to gain any income, its financing must be proved by the transferral of at least 3 Million Baht (approx. 70,000 Euro) into Thailand.
For the rental of an office within the Bangkok area, the following costs may be due: 300 – 700 THB/m2 (ca. 6 – 200 Euro) plus additional expenses plus a bond of three months rent. Costs for office equipment are comparable to Europe.
- Labour Costs
The salary of a secretary (with English knowledge) amounts to approx. 15,000 – 35,000 THB (ca. 350 – 900 Euro) per month (including nonwage labour costs); for an office clerk (with English knowledge) 15,000 – 30,000 THB (ca. 350 – 750 Euro) per month (including nonwage labour costs).
The costs for a vehicle (midrange car e.g. Toyota Corolla 1,6) including additional costs amount to approx. 30,000 THB (approx. 750 Euro) per month. Salary for a driver is about 7,500 THB (approx. 180 Euro) per month.
- Serviced Apartment
A Serviced Apartment (50 m2) including common room can be rented from 30.000 THB (approx. 750 Euro) per month. For a family (house, apartment of approx. 200 m2) the costs may amount to approx. 70.000 – 150.000 THB (approx 1.750 – 3.750 Euro). Salary for a maid is about 7.000 THB (approx. 170 Euro) per month.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.