Foreign companies may carry out certain business in Thailand through a branch office.
A Branch Office is a 100% foreign owned extension of the overseas headquarters using the same name as its parent company. It is not an independent legal entity separated from the head office, and there are no shareholders or directors.
There are no special requirements for foreign companies to register their branches in order to do business in Thailand. The requirements to apply for the Branch Office establishment permission in Thailand are mostly corporate documentation of the head office, which have to be provided to the officer in charge.
A Branch Office cannot carry out any reserved businesses without having a Foreign Business License (FBL). The approval for setting up a branch office by obtaining a FBL is at the Ministry of Commerce’s discretion. One condition is that there must be a unique business, an economic benefit for Thailand (such as transfer of technology), and no competition with Thai operations. Conditions, such as minimum capital, transfer of technology, and reporting requirements may be attached to the Foreign Business License.
The minimum investment capital must be greater than 25% of the estimated average annual operating expenses of the operation calculated over 3 years expenditure budget submitted with the license application, but not less than 3 million baht.
The minimum capital is remitted as follows:
• An amount of not less than 25% of the minimum capital must be brought in or remitted within the first three months
• Another 25% of the necessary capital must be brought in or remitted within first year
• Another 25% of the necessary capital must be brought in or remitted within second year
• The remaining 25% must be brought in or remitted by the end of the third year
If the branch office is conducting service business under a contract with a governmental authority or a state-enterprise, the entity is no longer required to apply for a FBL.
A Branch may exist for an indefinite period of time, unless a shorter period is indicated in the application as a result of a contract for a specific project to be performed in Thailand. Usually a Branch is used for projects of international contractors who do not intend to permanently do business in Thailand.
The foreign corporation could be exposed to civil, criminal, and tax liability if the branch office violates any law in Thailand. The foreign head office must appoint at least one branch office manager.
At least one person of those responsible for operating the business in Thailand must have a domicile in Thailand. Domicile means the contactable residence in Thailand which can be the place of business, excluding temporary residence such as hotels.
Regarding the tax perspective, the Thai Revenue Code deems the Branch Office to have independent tax entity status apart from its head office owing to the governmental advantage to levy tax on Branch Office businesses operating in Thailand. For tax purposes, a branch is subject to Thai corporate income tax at the regular 20% rate on income derived from its business operations in Thailand. Therefore, a branch office is required to apply for a taxpayer identification card and VAT certificate (if applicable) and to file annual corporate income tax returns with the Revenue Department.
Setting up a Branch in Thailand is possible, but the process involves high establishment costs and time of incorporation. Depending on the intended business, investors should consider setting up a separate Thai company, as this may be easier and thus more efficient, especially considering the separate taxation of the branch and the resulting accounting requirements.