The establishment of a branch office in Thailand will enable a foreign-owned and controlled organisation to generate revenue from its operations in Thailand by selling goods and services to customers within that branch office.
Most MNCs that want to expand their operations in Thailand avoid establishing a Thai Limited Company. Instead, they choose to expand throughout the region through Thailand-based branch offices. The Foreign Business Act B.E. 2542 governs international companies’ branch offices in Thailand (FBA).
As a result, if a branch office’s activities fall under any of the FBA’s categories, a Foreign Business License will be required (FBL). Unlike the Representative Office and Regional Office, branch offices are not limited to “non-trading” activities under Thai legislation. The branch offices can generate revenue.
The branch’s liabilities arising from its commercial activities in Thailand will not be restricted to Thailand. In reality, the procedures are permitted to be extended to the international headquarters.
Foreign Business License for Branch Office in Thailand
To build a branch office of a foreign firm in Thailand, you must apply for a Foreign Business License (FBL) under the category that best suits your business activity in Thailand, just as you would for a representative office. To acquire approval or denial for a Foreign Business License, it takes at least 60 days from the moment the application is submitted. The branch office is considered registered once the Foreign Business License has been authorised.
Requirements for Foreign Business License for Branch Office
- Foreign or Thai shareholding in a Thai Limited Company is not subject to any restrictions or prohibitions.
- Prior to receiving a Foreign Business License, a minimum of 3 million THB must be imported into the country. The applicant can bring it to Thailand in the following ways:
- Within the first three months after approval, at least 25% of the 3 million THB must be paid into the country.
- At least half of the capital must be remitted in the same year.
- After that, the remaining 25% of the capital must be sent each year.
- In order to oversee the management and day-to-day operations of the firm, at least one Agent must be employed in the Branch Office.
- Every fiscal year, the Revenue Department must receive a tax submission that includes the specifics of the business development, in report form, as well as financial reports and taxes.
Characteristics of Branch Office in Thailand
In Thailand, branch offices operate similarly to limited firms. Because it is not a registered company, it has no shareholders or directors. It is merely a local branch of a foreign corporation. This type of business has its own set of benefits. Such as the fact that there are no additional requirements for international enterprises wishing to open a branch office.
There’s no need to recruit a local investor. International companies normally prefer to form a branch office. It is more efficient and less expensive. However, it still requires to comply with the FBA’s standards as well as Thai legislation before establishing a business in Thailand.
Branch Office in Thailand: Taxes and Licenses
Total operating capital of 5 million Baht is one of the most important requirements for obtaining a Foreign Business License. It is mandatory to open a branch office of a foreign firm. The applicant must bring in this amount to Thailand at specific times throughout the course of four years.
It is also necessary to register for VAT, seek a taxpayer ID, and obtain a Commercial Registration Certificate in order to open a branch in Thailand. In Thailand, a corporation can also open a branch office of a foreign company. They have to register a Thai limited corporation in this situation.
Foreigners cannot run certain sorts of businesses, according to FBA B.E. 2542. Some of these enterprises may never get permission, while others can get so only if Thai citizens own at least 40% of the shares. Others may be foreign ownership permission of a majority or of 100%.
The FBL is not necessary for a branch office that doing manufacturing business or exports items from Thailand to other nations. A Branch Office can receive FBL from the Bureau of Foreign Business Administration, Business Development Department, Ministry of Commerce. Henceforth, it can conduct the other categories of businesses activities subject to the FBA.
In addition, if a Thai branch office deals in produced goods, it can sell those items in Thailand. If the same branch office wants to go into the service industry, it must first obtain an FBL for the service business. In the same way, if a branch office exports products from Thailand and sells them within the country, it needs FBL for domestic sales.
Branch Office in Thailand: Documentation
- A copy of the firm’s affidavit or associated documentation. It should describe the juristic person’s status. Additionally, it should include information such as name, capital, objectives, address, board of directors, and signing authority.
- A power of attorney that has been granted to the authorised person(s) of the legal entity, naming its representative(s) in Thailand.
- If the representative(s) is/are a foreigner, a copy of their passport. Alternatively, if the representative is a Thai national, a copy of the ID card.
- Under the immigration law, a copy of the household registration, residency permit, or paperwork that show the representative(s)’ temporary visa(s).
- The applicant’s affidavit establishing that the applicant, its manager(s), director(s), or representative(s) meet the qualifications set forth in Section 16 of the FBA.
- A letter detailing the contents of the applied-for business operations. This should include information about the applicant’s profile, the sort of business applied for. It should also include operational data, capital amount, business structure, size, technology transfer plans, and employment details.
- A map illustrating the applicant’s location in Thailand where he will be conducting business.
- If any other person has the authority to act on the applicant’s behalf, a power of attorney.
Branch Office in Thailand: Tax Structures
Thailand Branch Office is the same legal entity as its overseas parent business. Yet, Thai Tax Regulations treat it as a separate legal entity. A Branch Office in Thailand can be a profit-seeking organisation under Thai tax rules. Therefore, it is liable to all transaction and income taxes that apply to any corporate profit-seeking entity in Thailand.
The following is a list of the taxes that the Branch Office in Thailand is liable to:
- The branch office’s net profits are subject to corporate income tax.
- In Thailand, there is a withholding tax on income distributions to beneficiaries.
- Recipients of withholding taxes in other nations.
- On payments of income to branch office employees, there is a personal withholding tax.
- On certain types of business income transactions, a particular business tax (rather than a value-added tax) is payable.
- Remittances of branch office profits to the foreign head office are subject to withholding tax.
- On sales of goods and services in Thailand, as well as on imports of products and services into Thailand, there is a company value-added tax.
- Stamp duty is a charge payable on the use of certain instruments.
For more information on setting up a Branch Office in Thailand, mail us at [email protected]. Starting from setting up your branch office, up to the accounting, audit, taxation and payroll management of your firm, we can take care of everything.
