Representative office is a kind of office set up by a company in a foreign country to conduct marketing and other non-operational activities. Thus, a foreign company engaged in the business of international trading can set up its representative office here in Thailand for marketing objectives without the purpose of having an income generating activities. A representative office is generally easier to register than a branch office or a subsidiary because it will not be used for usual profit making business and therefore; there is a minimal incentive to be regulated. Likewise, the scope of activities of a representative office must be limited to the approved activities or significant Thailand tax liabilities that can occur. However, if the representative office engages in other services other than the approved activities, it will be considered as doing business in Thailand and therefore, it may be subject to Thai taxation for its overall income generated from Thailand. Any excess on the permitted activities can result to violation of the conditions of license to set up and operate a representative office which in turn could lead to the revocation of that license.
A representative office which engages with one or more of the approved activities in Thailand without rendering any service to any other person, and which refrains from prohibited activities, is not subject to Thai taxation. Such a representative office is understood to be receiving a subsidy from the head office to meet its expenses in Thailand. Gross receipts or revenues received by a representative office from the head office are not characterized as revenue to be included in the computation of juristic person income tax. Even though they are not subject to taxation in Thailand, all representative offices are still required to obtain a Corporate Tax Identification number and submit income tax returns and audited financial statements to the Revenue Department. They are also required to submit the same to the Department of Business Development.
In setting up a representative office in Thailand, one has to get a Foreign Business License. The Foreign Business Operation Committee has determined the guidelines as follows:-
Characteristic of a Representative Office
The Representative Office must have all 3 characteristics as follows:-
1) To be a juristic person established in accordance with a foreign country’s law and establish an office in Thailand in order to render services to the head office or the affiliated company or the group company in the foreign country only;
2) The Representative Office renders the service to the head office or the affiliated company or the group company without income from the service, except for the supporting fund for expenses of the Representative Office received from the head office;
3) The Representative Office has no authority to receive purchase orders or to offer for sale or to negotiate on business with any person or juristic person.
Scope of Services of a Representative Office
In operating business as a Representative Office, the representative office’s scope of services is to be within one or more of the following categories, depending upon the objectives and business characteristics of the Representative Office, as follows:-
1) To report the business movements in Thailand to the head office or affiliated company or the group company;
2) To give advice on various aspects pertaining to the goods distributed by the head office or affiliated company or the group company to the distributors or the users;
3) To seek for the supply source of goods or services in Thailand for the head office or affiliated company or the group company;
4) To inspect and control the quality and quantity of the goods that the head office or affiliated company or the group company purchased or hired to manufacture in Thailand;
5) To disseminate the information in relation to the new goods or services of the head office or affiliated company or the group company.
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