According to the Thai Foreign Business Act, after registering a Branch Office in Thailand for selling goods and services within this Thai Branch Office, even a foreign-owned and controlled corporation, will be allowed to generate income from any business practices undertaken in Thailand.
Similar to a representative office, to open a Branch Office of a foreign company in Thailand, you must apply for a Foreign Business License (FBL) under the category which best fits your business activities in Thailand. A Foreign Business License takes a period of at least 60 days from the date the application is submitted in order to receive approval or denial. Once the Foreign Business License has been approved, the branch office is then considered registered.
Should the creation of a Branch Office suit your business requirements in Thailand, we recommend that you visit one of our offices to discuss the process of getting a Foreign Business License for your company in greater detail. We have assisted scores of foreigners with company registration in Thailand. Contact us today at our Bangkok or Phuket office.
It is common that some multinational companies that plan to do business in Thailand do not want to undertake a Limited Company registration. A valid alternative to this option is to run their business through a branch office in Thailand. The Foreign Business Act governs the branch office under the provisions of the Thai law. This means that if the branch office falls into a category stipulated under the FBA, it will require an FBL to operate legally.
Foreign businesses that wish to establish a trading branch office must meet requirements specified in the FBA. Therefore, a company that intends to register a branch office must first determine where they fall within business activities according to the laws and regulations of Thailand. Some business activities are restricted for foreigners according to the FBA, but there are also certain activities that a foreign national or a foreign company can freely engage in.
Consideration must also be made regarding corporate income tax liability. Corporate Income Tax is levied on a partnership or other juristic body that is conducting business in Thailand or deriving specific kinds of income from Thailand. Corporate income tax is levied on net profits as stipulated in the Revenue Code of Thailand.
A branch office structure is often quite similar to that of a limited company. Both limited companies and branch offices can earn income in Thailand. There is, however, one decided difference between how a limited company and a branch office operate in Thailand. With a branch office in Thailand, there are no directors or shareholders; instead, there will be the head office that will run the company , even if such head office is overseas.
While a Regional Office and a Representative Office are limited to "non-trading" activities, branch offices are not limited in this way under the Thai law; moreover, they are entitled to earn income according to the Thai laws. Branch office liabilities are not limited to business in Thailand but will extend to any overseas head office. For example, when the Thailand branch office of a multinational company contracts with a company in Thailand but then breaches that agreement, the Thai company will sue the head office of the multinational company either jointly with the main offender or directly.
It should also be considered that setting up a satellite office in Bangkok or elsewhere in Thailand involves high establishment costs and is quite time-consuming. Foreign companies also require an FBL before they can commence business operations.
Each application submitted by a foreign company is reviewed on its own merits. When attempting to register a branch office in Thailand, the parent company will need to explain how this branch office will benefit Thailand in terms of development and financial gains. A specific process through which a parent company can obtain FBL for a branch office in Thailand is stipulated in the Foreign Business Act.
There are approximately 50 types of businesses that are restricted to foreign companies. Such restricted business activities have been grouped into three lists as follows:
It is essential for a foreign head office of a multinational company to understand how an established branch office operates in Thailand with regard to the FBA, and any foreign businesses seeking approval to establish a local branch must know whether they fall within one of these restricted categories.