Establishing a Branch Office in Thailand: A Guideline for Multinational Companies
Multinational companies or foreign investors seeking to expand their business operations in Thailand by establishing a Limited Company or a branch office. This article explores the intricacies of setting up a branch office in Thailand, including legal requirements and procedures.
A branch office in Thailand is a part of the parent company and is not considered as a separate legal entity. This implies that branch office is entitled to generate its profits and engage in investment activities through the controlled management of its parent company. In case that the branch office intends to operate its business in Thailand shall obtain the Foreign Business License (FBL) if such business activities fall in the business categories as specified in FBA.
To establish a branch office in Thailand, the parent company must comply with the following requirements:
- Registered Capital:
- The minimum capital requirement for a branch office is 3 million Baht, at least 25% of capital must be remitted into Thailand within three months of approval, Subsequently, 50% of the capital must be remitted during the same year, with the remaining 25% remitted annually thereafter.
- Appointment of a Branch Office’s Manager:
- the branch office is required to have one manager who is responsible for the operation of the its business shall be a Thai national if the foreigner is the branch office’s manager, such foreign manager shall have a residence in Thailand and obtain a work permit.
- Obtaining the Foreign Business License:
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- The branch office is required to apply for an FBL with the Department of Business Development of Thailand. The consideration process of FBL will be taken approximately 60 days from the date on which an application for FBL and supporting documents are complete and correct.
- Documentation and Incorporation:
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- Submission of the parent company’s incorporation documents, details of the board of directors, official registered office, business objectives and other relevant documents to the Thai Ministry of Commerce.
The Regional Office in Thailand
The Regional Office (“RO”) is a legal entity established under foreign laws with an office in Thailand conducting business on behalf of the head office. It provides services to branch offices, affiliate companies, or any other company under the parent company located in Thailand or the Asian region. The offices for foreign corporations are established according to regulations set by the Office of the Prime Minister, outlining the activities of regional offices for multinational or international. It is to consider that the business activities of RO are restricted to 7 categories as follow:
- coordination and supervision of operations
- Advisory and management
- Training and personnel development
- Financial management
- Marketing control and sales promotion plans
- Product development
- Research and development
To establish a regional office in Thailand, specific eligibility criteria must be met. Prior to commencing operations, the applicant must be a foreign company with at least one branch office or affiliate located in the Asian region. The purpose of the regional office should be provided as specified services such as management, coordination, technical support, or training to their affiliated companies. However, the regional office is not authorized to accept purchasing orders, making offers for sale, or negotiating business transactions with individuals or legal entities in the country where it is established. Furthermore, the activities conducted by the regional office must not generate income, all expenses incurred by the regional office must be covered by the head office.
In addition, regional offices are mandated to maintain suitable office space within Thailand and employ a minimum number of qualified staff. They are required to designate at least one local authorized director responsible for overseeing the office’s operations and serving as a liaison with government authorities. The authorized director must meet specified qualifications, including possessing a valid work permit and comply with Thai labor laws.
Regional Office is no longer classified as a restricted business under the Foreign Business Act (FBA). As a result, there is no longer requirements to obtain a foreign business license (FBL) to conduct the business in Thailand. However, it remains mandatory to obtain a legal entity number from the Ministry of Commerce.
The regional office provides several advantages for multinational corporations that are exempted from the requirement to register or incorporate as a juristic person, thereby relieving them from the obligation of submitting financial statements to any government authority. Additionally, the reginal offices are entitled to certain tax incentives, including exemption from corporate income tax (CIT) under the Revenue Code resulting in there is no requirement for registration for Value Added Tax (VAT) with the Revenue Department of Thailand.