The Representative Office in Thailand
Effective from 09.06.17, the Ministry of Commerce issued a ministerial regulation facilitating the set-up of a representative office. Ask us for the details.
Particularities of a representative office in Thailand
From an international perspective, a representative office typically has the role of a „small company“ and is an entry opportunity for a foreign investment. However, under Thai regulations, its application area is strictly limited. While the scope of business of a Thai corporation (Company Limited) is generally unlimited, the Representative Office renders its service to the head office or an affiliated company or a group company only. This is done without income from services, except for the supporting fund for an expense of the Representative Office received from the head office. It has no authority to receive purchase orders or to offer for sale or to negotiate on business with any person.
Under Thai regulations, its scope of activities is restricted to five categories only. These are
- to report the business movements in Thailand to the head office or affiliated company or the group company;
- to give advice on various aspects pertaining to the goods distributed by the head office or affiliated company or the group company to the distributors or the users in Thailand;
- to seek for the supply source of goods or services in Thailand for the head office or affiliated company or the group company;
- to inspect and control the quality and quantity of the goods that the head office or affiliated company or the group company purchased or hired to manufacture in Thailand;
- to disseminate the information in relation to the new goods or services of the head office or affiliated company or the group company.
As a consequence, any activities which are not covered by these five permitted activities, could not be done by the representative office. Among others it may not conduct the following activities in Thailand:
- Purchase, order or pay goods on behalf of the head office or affiliated companies or any activities related to this.
- Receive purchase orders from any person or juristic person.
- Provide after-sale-services concerning installation and maintenance.
- Provide advice concerning goods not produced or sold by the head office or affiliated companies.
- Sales offer for any natural or juristic person.
- Coordination of sale and purchase on behalf of the head office or affiliated companies.
- Provide information concerning goods that have already been sold in Thailand.
- Carry out activities as middleman or agent between a customer in Thailand and the head office or affiliated companies.
- Plan and coordinate with any organization on behalf of the head office or affiliated companies.
- Representation of head office or affiliated companies regarding any contract negotiations or activities.
- Report information to any company that is not the head office or affiliated company.
If the representative office engages in other activities for which permission is not granted, such as buying or selling goods on behalf of the head office, it will be regarded as doing business in Thailand and may be subject to Thai taxation on all income received from Thailand. Also, the representative office may not act on behalf of third persons. Any such business or income-earning activities could amount to a violation of the conditions of the license to establish and operate a representative office, which in turn could result in revocation of that license.
Even though they are not subject to taxation in Thailand, all representative offices are still required to obtain a Corporate Tax Identification number and submit income tax returns and audited financial statements to the Revenue Department. They are also required to submit the same to the Department of Business Development. The law firm has a broad scope of experiences to set-up a representative office, to advise on tax issues and to close down this type of dependent foreign legal entity in Thailand.