Multinational companies who want to extend their reach into Thailand without creating a separate legal entity. The have two options for entering the Thai market. They can form a branch office or a representative office. Both are governed by the Foreign Business Act but they serve two different functions.
The primary function of a representative office is to provide information and assistance to their foreign head offices. Representative offices in Thailand are not allowed to engage in profit seeking activities or act on behalf of third parties. They are not allowed to receive orders or to offer to negotiate a sale with any person or juristic person. Because of this fact, representative offices are exempt from Thai corporate income taxes or registering for the VAT.
The scope of their activities are limited to non-trading activities such as:
- Search and procuring information for the overseas headquarters
- Ensuing the quality and quantity of the product ordered by the headquarters
- Advise the head office on products offered by the head office to local distributors or consumers
- Disseminate news or updates regarding new products or services offered by the head office
- Reporting the economic or political situation in Thailand to the headquarters.
Representative offices are meant to only provide support to the head office and engage local customers. Exceeding the scope of activities can result in the income of the parent or affiliated companies being considered to be earned in Thailand and be subject to Thai taxation.
As a foreign business, a representative office will have to obtain a Foreign Business License. Representative Offices can also support a work permit for a foreign national.
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