If you have an established company and want to start doing business in Thailand, a branch office might be right for you. Branch offices are similar to limited companies, although these offices do not have directors or shareholders and are not registered companies. Instead, these offices are an extension of the parent company. Branch offices have the same name as the parent company and engage in the same activities.
Benefits of Branch Office
Branch offices provide businesses with several benefits. First, establishing a branch office is easier than registering a new business. You don’t need to fill out nearly as much paperwork when compared to a new business.
Branch offices also do not have a registered capital requirement. However, there is a minimum capital injection requirement when opening a branch office.
Also, branch offices can generate profits for the parent company. This is different from a representative office that can only participate in non-revenue earning activities. Because these offices can generate profits, many companies view this as a viable way to expand operations into Thailand.
Branch offices are easy to maintain. Branch offices are only required to declare taxable items when sending local invoices. This makes day-to-day operations much easier.
Drawbacks of Branch Office
While branch offices provide lots of advantages, they are not for everyone. Learn about the drawbacks before deciding if this is right for you. If a branch office isn’t the right choice, contact Plizz to talk about your other options.
First, branch offices are not legal entities. The parent company is liable for the office. It’s essential to have the right representative in place, so the branch office does not harm the parent company.
Also, the business scope is limited when operating a branch office. Branch offices are not allowed to import or export and must operate within the scope of the parent company. Expansion is not allowed when operating a branch office. Companies that want to expand their operations must open a different type of business in Thailand.
Eventually, a Branch Office may create a Permanent Establishment and therefore have tax implications for the parent company.
Companies must receive a Foreign Business License before opening a branch office in Thailand. Once the application is accepted, it is reviewed by the Foreign Business Committee.
While the Thai government does not have a registered capital requirement, it does have a minimum capital requirement of 3 million Baht. The parent company must follow a schedule when bringing the capital into Thailand.
A minimum of 25 percent of the capital needs to arrive in Thailand within three months of opening the branch office. Fifty percent is due within a year, and the remaining 25 percent is due the following year.
If the company intends to keep the branch office open for less than three years, all the capital must be sent to Thailand within six months of opening the office. If the capital requirement is not met, the government can shut down the branch office.
Timeline for Setting up a Branch Office
If you choose to set up a branch office on your own, you can expect to undergo a laborious process. Failing to provide the proper documentation could cause your application to get rejected, and you’ll have to start all over again. Fortunately, Plizz can ensure the process goes smoothly.
You will begin by applying for your Foreign Business License. This process is relatively complicated. You will need to describe the business activities in detail. These include the scope of the business, its size, and information about the employees.
The application also needs to include documents from the parent company. These include the list of directors and the Articles of Association.
The branch office must have a branch representative located in Thailand. The parent company must submit a power of attorney stating that the representative can represent the business.
The application also includes information about the representative. If the representative is a Thai national, you must include a copy of his or her ID card. If the representative is a foreigner, include a copy of the passport. A foreign representative also must have a visa. Include a copy of the visa with the application.
The location of the registration office is also required. Many people choose to include a map of the location.
After an office of the Ministry of Commerce reviews the application, it will be sent to the Foreign Business Committee. The committee considers five factors before approving or denying applications.
First, is this business beneficial or harmful to national security? A properly created application shows that the branch office will be an asset instead of a hindrance.
Second, the board will determine if the branch office will aid in social and economic development. Companies can explain how the branch office will promote social and economic development in the application.
Third, it will decide if the branch office fits in with the country. It will look at the art, culture, morals, and other factors when determining this. It’s critical to explain why this office will be a good fit in Thailand when filling out the application.
Fourth, it will consider factors that can impact the country, such as conservation efforts, consumer protection, and employment opportunities. These factors should be outlined in the application.
Fifth, the board considers technology, research, and development. Will the branch office help in any way? If so, this needs to be included in the application, so you’ll be approved to open a branch office.
As you can see, this is very complicated. You want the process to go as smoothly as possible, so let Plizz help. Our legal team can prepare and submit your application so that you can get approved the first time. You are ready to do business in Thailand, so let Plizz fast-track the process for you.
Contact Plizz to receive a quote. Then we will begin preparing your application.
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