If you are thinking of setting up a Representative Office in Thailand, there are several things to consider. This article will discuss the taxation of a Representative Office, which business forms are available for foreign companies, and the types of non-revenue generating activities that a Representative Office in Thailand can engage in. Lastly, we will cover what locations are acceptable for Representative Offices. Hopefully, this article will answer many of your questions about this topic.
Representative Office Taxation
A representative office is a branch of a company with the legal status of a legal entity in Thailand. Representative offices do not generate income, issue invoices or collect revenue and are not subject to Thai income tax. However, if a foreign company chooses to establish a representative office in Thailand, it should be aware that capital must be brought into Thailand. Normally, the minimum amount of capital required for setting up a representative office in Thailand is 2 million baht. The remaining amount should be paid within three years.
Business Forms for Foreign Companies
In Thailand, foreign companies may set up a representative office for the purpose of conducting business operations. However, they should ensure that they only conduct activities approved by the Ministry of Commerce. For this purpose, the representative office must be registered with a minimum registered capital of 2 million baht, which is the equivalent of US$56,211. The initial capital should be invested within six months from the date of registration. As the business grows, this capital should increase to 25 percent of the total capital.
Non-revenue-generating Activities for Representative Office
A Representative Office is permitted to conduct certain non-revenue-generating activities in Thailand. These activities include promoting products and services, performing orders from the head office, and facilitating exports. However, Representative Offices cannot generate income or engage in sales or transactions. In addition, they are not allowed to provide any services or goods for payment. Therefore, it is crucial for a Representative Office to be regulated and registered according to the laws and regulations of Thailand.
Location of a Representative Office
When you are establishing a foreign company in Thailand, a representative office is a good option. Although the representative office may not be engaged in revenue-generating activities, it can serve as an extension of the head office in terms of interacting with local business interests. It is also more cost-effective than a branch office and can be more flexible. Nevertheless, it is essential to consider the following things before establishing a representative office in Thailand.
Accounting Principles
An Institute of Certified Accountants and Auditors (ICAA) of Thailand promotes the use of generally accepted accounting principles when conducting business in Thailand. These principles require that companies maintain financial records in accordance with accepted accounting practices. They are required to follow Thailand Financial Reporting Standards, which sets forth rules for publicly accountable and non-public entities. ICAA Thailand Accounting Principles is applicable to foreign-owned companies.
Costs of Setting Up a Representative Office
To set up a Representative Office in Thailand, foreign investors need to provide at least 7 percent of the capital of the parent company. They must transfer the capital to Thailand within a specified time frame. Usually, 25% of the required registered capital must be transferred in the first three months of operation, the second half within the first year, and the remainder within the third year. The Representative Office must employ at least one accountant who resides in Thailand.