According to the Foreign Business Act in Thailand, registering a Branch Office in Thailand that sells goods and services within their Thailand Branch Office, even as a foreign-owned and controlled corporation, will be allowed to derive revenue from any business practices undertaken in Thailand.
Similar to the 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 come into our offices to discuss the process to get your company a Foreign Business License 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 want 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 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 want to establish a trading branch office must meet requirements as specified in the FBA. Therefore, a company that wants to register a branch office must first establish where they fall within business activities according to Thailand laws and regulations. Some business activities are restricted for foreigners according to the FBA, but there are also some activities that foreign nationals of a foreign company can freely engage in.
Consideration must also be made regarding corporate income tax liability. Corporate Income Tax is levied against a partnership or juristic company 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 what is seen in 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 operates in Thailand. With a branch office in Thailand, there are no directors or shareholders, etc. With a branch office, there will be a head office that will run the company for a while, even when the 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 Thai law. They can also earn income according to 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 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 motivate how this branch office will benefit Thailand in terms of development and financial gain. 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 around 50 types of business that are restricted to foreign companies. Restricted Business Operation has been grouped into three lists.
It is essential for a foreign head office of multinational companies to understand how an established branch office operates in Thailand around the FBA, and foreign businesses seeking approval to establish a local branch must know whether they fall within one of these restricted categories.