Branches of Foreign Companies
There is no special requirement for foreign companies to register their branches in order to do business in Thailand. However, most business activities fall within the scope of one or more laws or regulations which require special registration, either before or after the commencement of activities. Foreign business establishments must, therefore, follow generally accepted procedures. It is important to clarify beforehand what constitutes income subject to Thai tax because the Revenue Department may consider revenues directly earned by the foreign head office from sources within Thailand as subject to Thai taxes.
As a condition for approval of an Alien Business License to a branch of a foreign corporation, working capital amounting to a total of five million baht in foreign exchange must be brought into Thailand within certain intervals over a four-year period.
The branch may be allowed to operate for a period of five years, unless a shorter period is indicated in the application as a result of a contract to be performed in Thailand. Extension of the original duration of the license to operate may be granted, provided the working capital required to be brought into Thailand is met.
A representative office of foreign corporations may also be established to engage in limited “non-trading” activities, such as sourcing of goods or services in Thailand for its head office or inspecting and controlling quality of goods which its head office purchases in Thailand. Other activities can cover disseminating information about new products and services of its head office, and reporting to its head office on local business development and activities.
The working capital contributions as discussed above in respect to branches apply.
On December 28, 2001, the Board of Investment (BOI) Thailand, chaired by Deputy Prime Minister and Minister of Finance, Somkid Jatusripitak, met and approved amendments to the investment promotion conditions for regional headquarters (Category 7.9) with the aim of increasing employment, the transfer of management technology and enhance personnel practices.
The amendments brought the BOI’s promotion of regional headquarters in line with the Ministry of Finance measures to support the establishment of Regional Operating Headquarters (ROH), announced on December 11, 2001.
Projects approved under this category (7.9) will be eligible to receive BOI non-tax incentives, such as permission to own land and permission to bring in foreign experts and technicians, as well as an attractive range of tax-based measures that will be awarded by the Revenue Department at the Ministry of Finance.
Conditions for approval have been liberalized to make Thailand more attractive as a site for establishment of ROHs. The previous condition requiring a company to supervise activities in at least five countries has been reduced to three countries, and the requirement that companies invest a minimum of 40 million baht in real estate has been eliminated.
Promoted projects will be required to have paid up registered capital of at least 10 million baht and overseas revenue must account for at least half of a project’s annual income. Below is a brief description of the ROH. For complete information, check with the Ministry of Finance.
A regional office of a multinational corporation may also be established to coordinate and direct the operation of the branches and affiliates of the head office in the region on behalf of the head office.
A regional office has the ability to coordinate and supervise the company’s branches and its affiliated companies in the region on behalf of the head office. The regional office may provide these branches and affiliated companies with:
- Advisory and management services
- Financial management services
- Training and personnel development services
- Marketing control and sales promotion plans
- Product development
- Research and development services
Benefits from Establishing a Regional Office
Companies establishing regional offices are eligible to receive BOI non-tax incentives, such as permission to own land and to bring in foreign experts and technicians, as well as an attractive range of tax-based measures awarded by the Revenue Department at the Ministry of Finance. Inquire at the Ministry of Finance for details.
Such companies are not required to be registered or incorporated as juristic persons in Thailand, and do not have to submit any financial statements to the Department of Commercial Registration. The Department will assist in customs clearance of the personal effects of transferred foreign staff and in their applications for further temporary stay in the Kingdom or change in visa type.
Work Permits for aliens performing work in the regional office will be granted for up to 5 persons depending on necessity and volume of work in each particular case.
Conditions for Permission to Establish a Regional Office:
Regional Office must not:
- Derive any income from its activities. Expenditures incurred by the regional office shall be borne by the head office.
- Have the power to accept a purchase order or make a sales offer.
- Negotiate or enter into business arrangements with any natural or juristic person within the Kingdom.
A permit to establish a regional office, valid for five years, can be granted after application with the Alien Business Section of the Department of Commercial Registration at the Ministry of Commerce. The fee is five baht per every 1,000 baht of registered capital, not to exceed 5,000 baht.
When a permit to establish a regional office is issued, it may be subject to the following conditions:
- The total debt financing used in the business shall not exceed seven times the portion of the capital owned by shareholders or the owner of the business.
- Money used in the regional office shall be remitted from abroad and shall not be less than a total of 5,000,000 baht. During the first year period, at least 2,000,000 baht of the total must be remitted, at least half of which must be remitted within the first six months. Then, no less than 1,000,000 baht should be remitted each succeeding year until the full 5,000,000 baht has been transferred. Documents verifying this transfer must be presented to the Department of Commercial Registration.
- At least one person who is responsible for operating the regional office must have their domicile in the Kingdom.
The Director-General of the Department of Commercial Registration is also authorized to impose any conditions on a business permit granted under the rules.
Regional Trade and Investment Support Offices
In April, 1996, the Board of Investment announced the establishment of trade and investment support offices would become a new category of activities eligible for investment promotion. Projects in this category are eligible for BOI non-tax incentives, including:
- Permission to own land for an office.
- Permission to bring in foreign nationals to undertake investment feasibility studies.
- Permission to bring in as many foreign technicians and experts as required.
- Permission to take or remit foreign currency abroad.
- No limit on number of shares owned by foreigners.
- The range of activities eligible for promotion is.
- Controlling and advising affiliated companies.
- All types of consulting services, except those engaged in:
- Buying and selling securities
- Foreign currency exchange
- Legal affairs
- Civil engineering
Get in contact with our corporate lawyer in Thailand to learn more about what type of business structure is right for your business. Our team of legal experts will make sure that the entire process of registering your company in Thailand goes smooth for you.