It is often found that most of the multinational companies seek opportunity to have their presence in Thailand. But, often they find the process of registering their company in Thailand to be a cumbersome process. Due to this reason, we recommend most of our clients to open a Branch Office in Thailand. It is because, a Branch Office is easy to incorporate with lesser liabilities than a Thai LLC.
Business owners willing to conduct some business operations in Thailand may do so by opening a branch office, which won’t be regarded as a different legal organization. Despite having a separate tax entity, the branch will only function as an element of the parent business. Branch Office needs registration from the Ministry of Commerce in Thailand. Additionally, it often comes up as Permanent Establishment in Thailand to represent the foreign company.
This article will give you thorough information about the process, merits and demerits of opening a branch office in Thailand.
What is a Branch Office in Thailand?
Requirements to Open a Branch Office in Thailand
Process to Open a Branch Office in Thailand
Benefits of Branch office in Thailand
Limitations of Branch Office in Thailand
Greatest Help you Need to Open a Branch Office in Thailand
What is a Branch Office in Thailand?
A branch office is primarily a foreign business that registers a branch in Thailand to represent its presence there. The foreign company’s Thai branch is only an outpost of its overseas head office. It never gains a distinct legal entity from the latter. As a result, the branch will share the same shareholders and bylaws as the corporate headquarters. The branch’s operations could be distinct from those of the foreign head office.
The Foreign Business Act in Thailand permits foreign-owned and controlled corporations to create a branch office in Thailand. A branch office can sell goods and services inside Thailand to generate income from any business activity.
Requirements to Open a Branch Office in Thailand
A foreign business can open a Branch office in Thailand if it can directly help the Thai Economy. The branch gains the identity as a Permanent Establishment in Thailand depending upon the tenure of its operation in Thailand. On the basis of the tenure of operations, following are the capital requirements:
- For branch to operate for less than three years, applicant must remit the minimum capital to Thailand within six months.
- To operate a branch for more than three years, transfer 25% of the capital within the first three months. However, applicant must transfer half of this capital within the first year.
- You must convert the payment to Thai Baht at the correct exchange rate for the transfer date.
Apart from that, few other basic requirements are as follows in legal and capital perspective:
- Foreign or Thai shareholding is not subject to any restrictions in case of a Branch Office in Thailand.
- Before the issuance of the foreign business license, it is mandatory to remit a minimum amount of 3 million THB to Thailand. Following is the process of remittance:
- Within the first three months after approval, the remittance must be at least 25% of the $3 million to Thailand;
- Within the same year, transfer at least 50% of the capital.
- After then, send the remaining 25% of the money every year.
- To handle the management and day-to-day operations of the firm, the Branch Office must hire at least one Agent.
- You have to transfer at least 50% of the capital within the same year.
- Every fiscal year, tax submissions to the Revenue Department must include financial reports and tax returns. Additionally, it must include report forms containing information on how the business is growing.
Process to Open a Branch Office in Thailand
The firm documentation from the overseas head office must be notarized and translated to Thai. Additionally, you must submit all details of your business plan and operations for the branch office with the application. Please find below a list of the mandatory documents that must accompany the application to the Ministry of Commerce.
- A copy of a certificate or other evidence of legal person status that includes information on the company’s name, registered capital, business goals, principal place of business, list of board members, and signatories who are allowed to act on behalf of the legal person.
- A letter appointing a person in Thailand (who may be a foreigner or a Thai national) as the agent in charge of running the branch’s activities on the legal representative’s behalf is issued by the foreign legal entity’s authorized signatory.
- A copy of the appointed person’s passport, foreigner identification card, house registration certificate, or other proof of residence in Thailand, as well as any other documentation showing that they have been granted permission to enter Thailand for a brief period of time under the country’s immigration laws.
- A statement from the foreign legal entity attesting that the applicant, directors, managers, and appointed person meet the requirements and don’t have any of the traits listed in section 16 of the Foreign Business Act, B.E. 2542, that are forbidden (1999).
- A map showing the general position of the Thai location where the business is located.
- To open a branch office in Thailand, a power of attorney is mandatory if another person holds permission to act on the applicants’ behalf.
After arranging all these, you have to follow the following steps:
Check the name availability
As an extension of the parent business, your branch office in Thailand will have the same name as that of your existing business. However, as per the norms, you have to go through a preliminary round of name check is mandatory.
Documentation
Along with the already mentioned paperworks, you must prepare the Articles of Association supported by the original and copies of incorporation of the parent organization.
Obtain Approval
For the approval your business must be able to demonstrate that it is going to bring in benefit to the Thai economy. Additionally, you have to apply and obtain approval for the foreign business license in Thailand.
Prepare Capital
A minimum of 3 billion THB is necessary to start your branch office in Thailand. You must prepare your funds along with the additional running and establishment expenses.
Obtain necessary license
Depending upon the type of business you want to conduct through your branch office in Thailand, you have to apply for the relevant licenses and certifications. Additionally, branches of international businesses need special licenses and permissions to operate in Thailand. You can get to know all about them from experienced and authorized law firms in Thailand that can assist you in the process.
Benefits of Branch Office in Thailand
Out of the many, the most crucial benefits that you can avail on opening a branch office in Thailand are as follows:
- You can hold up to 100% foreign ownership unlike other forms of business in Thailand. Normally, other forms of business in Thailand have restrictions of up to 49% of foreign ownership. There are exceptions for citizens of few nations like the United States due to bilateral trade treaties like the US-Thai Amity Treaty.
- The cost of incorporation is relatively lesser than other forms of offices like a representative office, regional office or a registered LLC office in Thailand.
- The Thai Foreign Business Act covers a majority of types of business activities and hence it will be pretty easy for you to get the appropriate licenses and certifications to operate your business in Thailand.
- Your branch office in Thailand is the integral part of your existing business. Therefore, the management has full control on the operations and staff of the same with negligible or minimum intersection of local legal obligations.
- There is always a scope to establish an extension of your branch office in the form of a Thai registered or subsidiary company in Thailand.
- The cost of incorporation is lesser than other forms of businesses.
- It will take less time for you to start your branch office in Thailand in comparison with other forms of business structures.
- Dissolution and Closure of a branch office is easy if it is not making the company money or is running in loss. Transfer of assets and employees can be redundant (typically), and the parent organization can manage any outstanding obligations.
Limitations of Branch Office in Thailand
If your vision is expanding your business in Thailand, then there are no apparent limitations in starting your branch office in Thailand. But, if you are thinking of creating a Thai business unit, then there can be certain limitations like:
- A branch office is a separate business unit and gains identity as a permanent establishment only under certain specific conditions.
- As setting up of a branch office does not fall in the category of company registration in Thailand, it cannot legally represent your office as a Thai entity.
- Although your branch office in Thailand is not a Thai juristic entity, yet, you are liable to pay corporate income tax in Thailand. The rate of tax is the same as that a Thai company is liable to pay.
- The activities of the branch office take place in the name of the parent companies the former lacks an independent legal personality. Therefore, the parent firm is accountable for the conduct of its branch. For instance, the overseas firm itself might be sued if branch employees violate contracts or conduct irresponsibly.
- A branch office may have fewer options when it comes to sponsoring visas to hire workers from outside because it is not a local business. Transfers within the parent firm and the creation of a global team could become more challenging as a result.
However, all these limitations will show up as great disadvantages if you are planning a long time operation in Thailand. It is because, initially, a branch office receives the permission to operate for 5 years. Henceforth, it gets extension on the basis of its performance in the kingdom.
Else wise, for good and fair trade practices handled by responsible and sensible managers in your branch office in Thailand will surely increase your revenue volume.
The Greatest Help!
In the process of starting a branch office in Thailand, you must have the following information:
- Idea of the local business practices
- Knowledge of Thai Civil and Commercial Code
- Information of application procedure to the bodies like:
- Revenue Department of Thailand
- Department of Business Development (Unit of Ministry of Commerce, Thailand)
- Licensing and Certification bodies
- Prepare a complete and fool-proof documentation
- Obtain approval at all stages of your application to open a branch office in Thailand
You will never be able to complete this list without local Thai support and assistance from reliable legal, accounting and taxation firms. Be sure enough to select from a reliable full-service law firms in Thailand so that you can be able to avail the following services from a single source:
- Branch Office Formation in Thailand
- Documentation and Application Support
- Immigration Support
- Payroll and Social Security Management
- Accounting and Taxation
- Translation and Notary Services
You can book a round of free consultation with us to get all these services under a single roof with your least involvement in the thoroughness of the procedure of opening a branch office in Thailand. Additionally, we also take care that your business through your new office witnesses growth and positive simulation. Feel free to write your requirements to us at [email protected].
