Set up a Branch Office in Thailand

Updated on Friday 19th October 2018

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The branch is an extension of the parent company and one of the ways in which foreign corporations can enter the Thai market.

A branch office is an ideal choice for multinational companies that want to develop a presence in Thailand’s business market but do not want to open a new company in Thailand

The list below highlights the main traits of the branch, characteristics that set it apart from the subsidiary or the limited liability company. Investors are advised to keep these in mind when choosing to open this business, form especially the one referring to liability. 
 
  1. Easy incorporation:  the branch is easier to set up compared to a local company, an advantage for foreign businesses.
  2. Limited independence: in terms of independence, the branch is only partially independent in relation to the foreign company.
  3. Liability: the foreign company is liable for the debts and obligations of the Thai branch; this also extends to lawsuits brought against the branch.
  4. Tax: the branch is taxed at the usual corporate income tax rate but only on the profits derived from the country.

Characteristics of branches in Thailand


Branch offices in Thailand are treated similar to limited companies, only there are no shareholders or directors, as it is not a registered company, but a local branch of a foreign Head Office. This type of business form has its advantages: there are no special conditions for foreign companies to register a branch office and there is no requirement to have a local shareholder. Our Thai company formation experts can give you more details on the particular characteristics of a branch office.

Although foreign companies usually consider opening a branch office to be effective and low-cost, it is still required to comply with the requirements imposed by the Foreign Business Act according to the Thai laws before they can open a company in Thailand. At least one representative or appointed individual who will be in charge of the branch operations must have his domicile in Thailand.

Requirements for Thai branches

 
The branch operations are approved in Thailand if the foreign company is able to show that the establishment of the branch will have a direct economic benefit in the country.
 
The branch is treated as a permanent establishment in Thailand and there are several conditions that must be met in terms of share capital according to the period of time for which the parent company wishes to keep an operational branch in the country.
 
The main requirements are as follows:
- The minimum capital must be remitted in Thailand within six months when the period for which the branch will be doing business is less than three years.
- When the branch will be doing business for more than three years, at least 25% of the capital must be remitted within the first three months and half of this capital is to be remitted within the first year of the operations.
- This capital is to be converted from foreign currency to Thai Baht at the appropriate conversion rate according to the date of the transfer.
 
Apart from these conditions for the minimum capital, the branch must obtain a license from the Ministry of Commerce and in terms of reporting obligations, it must prepare an annual operation report. Our Thailand company formation specialists can give you more details.

One condition that may apply to branches operating on the Thai market, and to which investors are advised to pay attention, is that they bring a clear economic benefit and they do not compete with Thai companies. The approval of the branch, for its functioning on the market, lies with the Ministry of Commerce. If approved, the Thai branch will be required to comply not only with the requirements for the capital but also a set of other yearly requirements, such as submitting a technology transfer report and an annual operation report to the authorities. 
 
The taxation rate for branches in Thailand is the same one as for resident companies although this corporate income tax only applies to the Thai-sourced income. A branch remittance tax is imposed on the value of the profits paid to a head office after the tax has been imposed on these. The standard corporate income tax in Thailand is 20%. One of our Thai company formation agents can give you more details about the taxation system in the country.
 

The branch compared to other business forms


Opening a branch in Thailand is not the only option for a foreign company to get started on the Thai market. Two other notable possibilities include opening a representative office or a subsidiary.
 
Out of these options, the representative office is the one with the most limitations. It is not allowed to conduct business activities but it can be used for consultative or research purposes. For example, this office can report back to the main company about the conditions on the market, the clients, the supplies situation and other information relevant for the parent company. Once the market research is complete, the foreign company can proceed to open a branch or a subsidiary. The representative office is one business form that does not require a foreign business license due to the simple and non-economic nature of the activities conducted. However, foreign companies will be expected to provide a minimum capital requirement, according to the Foreign Business Act.

When choosing the appropriate type of legal structure to enter the Thai market, it is advisable to seek specialized counseling from a business consultant or a team of company registration agents. Our experts are able to answer your questions about the differences between the branch, the representative office, and the subsidiary. Once you have decided which business form suits your needs for running a business in the country, we can also assist you with the registration procedure. The language barrier can be significant for many foreign investors and our agents will handle the process on your behalf with diligence and consideration.
 

If you need comprehensive information regarding the whole process of setting up a branch office, please contact our company registration consultants in Thailand for support.

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