Rather than setting up a branch office or incorporating a new company limited, a Thailand representative office is another option for foreigners who wish to extend their business in Thailand. Even though the representative office is situated in Thailand, the liability is not limited only to an entity in Thailand. Therefore, as it is considered an extension from the head office overseas, any liabilities which may occur shall be extended to the head office overseas as well.
There are some restrictions to be considered before incorporating a representative office in Thailand. The most important restriction under the representative office is that it is not allowed to generate any income. Therefore, the representative office is unable to issue an invoice or provide any sales. All the income will instead go directly to the head office overseas. Moreover, not all activities are allowed to operate under this type of entity. The five business activities which are permitted for representative offices are as follows:
1. Reporting business movements in Thailand to the head office.
2. Giving advice on various aspects concerning goods to the head office.
3. Sourcing goods or services in Thailand for the head office.
4. Checking and controlling the quality and quantity of goods.
5. Disseminating information regarding new goods or services to the head office.
Not only is the representative office considered a foreign entity, but also, all its business activities are considered “Service Business” under category three (21) of the Foreign Business Act, therefore, the Foreign Business License shall be applied and approved before commencing any activities.
The capitalization of the representative is based on three years of estimated operating expenses. 25% from such estimated expenses is its capitalization. However, the minimum of such 25% is at least three million THB. In other words, if the three-year estimated operating expense is less than three million THB, the required capitalization is three million THB.