This article shall briefly set out the various pro and con points relating to setting up a new representative office in Thailand from various perspectives including ongoing legal compliance, tax and visa/ work permit considerations.
Registration & Management Considerations
| Pro | Con |
| A representative office is relatively easy to re-register at the Department of Business Development (DBD) as fewer documents are required when compared to the registration of a company limited or a branch office. It will however need to lodge copies of the parent company’s certificate of incorporation, memorandum and articles of association (or other equivalent documents) and a power of attorney for the representative office manager. It is worth noting that the DBD may request other documentation as part of the registration process. | Limited scope of activities which a representative office can carry out, these include:
1. Sourcing of goods in Thailand which are to be purchased by its head office or an affiliated company 2. Conducting quality control on the goods to be purchased in Thailand by its head office or an affiliated company. 3. Providing technical advice only (not installation support or after sales services) for such goods. 4. Distributing of information concerning new goods and/or services of its Head Office or affiliated company or the group company which will be sold in Thailand. 5. Reporting on business trends/ economic situation in Thailand to its Head Office or Affiliated Company. |
| It is relatively easier to change the representative office manager as compared to a director of a company limited as there is no need to hold a board of director meeting or a shareholder meeting, the parent company only needs to appoint a new person using a new notarized and legalized power of attorney. | A representative office can only be involved in non-revenue generating activities. Furthermore, it cannot engage in profit-generating activities. |
| A representative office has simplified management given that it only needs one person to act as the ‘representative office manager’, however, it could be more than one person depending on who the parent company wishes to appoint as the representative office manager(s). | A representative office has no authority to accept a purchase order from clients or to make an offer for selling goods/ services or to negotiate for the carrying out of business with a person or juristic person in Thailand. |
| A representative office is relatively easier to close when compared to the liquidation and dissolution of a company limited. | All expenditure incurred by a representative office must be covered by its overseas parent company. |
| Re-registering a representative office in Thailand does not require a FBL under the FBA. |
Ongoing Legal Compliance
| Pro | Con |
| Given that a representative office is not a separate legal entity but rather a part of an existing company registered outside of Thailand (i.e. the parent company) there is no need for a representative office to have an annual shareholder Annual General Meeting (AGM), hence less legal compliance in this regard. | Given that a representative office is a part of its parent company rather than a separate legal entity, this effectively means that the parent company is liable under civil and criminal law for all the acts and omissions of the representative office. |
The representative office has ongoing compliance requirements including notifying the DBD if:
|
Taxation Considerations
| Pro | Con |
| A representative office is not subject to corporate income tax as it cannot generate revenue.
|
Visa & Work Permit Considerations
| Pro | Con |
| Requirements for foreign employee non-immigrant B visa extensions are easier when compared to a company limited given that the required Thai: foreign staff ratio is only 1:1 (not 4:1 as in case of a company limited). | The work permit issuance and renewal for foreign (non-Thai) staff shall be linked to the foreign currency remittance from the parent company to the branch office. A representative office requires at least 3 million baht in foreign currency remittance per work permit.
The evidence of remittance (credit advice) must be certified by the bank and should be no older than six months from the date of yearly renewal of the relevant work permit. |
| A representative office has less scope for foreign (non-Thai) employees, no more than 5 work permits can be issued under a representative office. |
Writer: Ryan Crowley – Foreign Services Manager
Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330.
Tel: (66) 2680 9777
Fax: (66) 2680 9711
Email: info@dlo.co.th
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