Branch Office in Thailand

If your company is already established and you’re looking to expand into Thailand, setting up a branch office might be the right option. A branch office operates as an extension of your parent company, rather than a separate legal entity. It shares the same name and engages in similar activities, without requiring directors or shareholders like a typical limited company.

Advantages of a Branch Office

Opening a branch office offers several key advantages. First, the process is less complicated than registering a brand-new company, saving you time and effort. You won’t have to deal with as much paperwork compared to establishing a fresh business entity.

Additionally, branch offices are not subject to a registered capital requirement, although there is a minimum capital investment needed when starting the office.

Another significant benefit is that branch offices are allowed to generate profits for the parent company, unlike representative offices, which are limited to non-revenue generating activities. This ability to profit makes branch offices a popular choice for businesses seeking to enter the Thai market.

From an operational standpoint, branch offices are easy to maintain. They only need to declare taxable items when issuing invoices in Thailand, simplifying the ongoing process of compliance.

Disadvantages of a Branch Office

While a branch office has its benefits, it may not be the best option for every business. If a branch office doesn’t seem like the right fit, Lotus Ledger is here to help you explore other possibilities.

One limitation is that a branch office is not a distinct legal entity; it is an extension of the parent company. This means the parent company is fully responsible for the operations and any liabilities that arise from the branch office. Therefore, it’s crucial to appoint a competent and trustworthy representative to manage the office effectively.

Another restriction is that branch offices are only permitted to operate within the scope of activities of the parent company. They cannot engage in activities such as importing or exporting, and they cannot expand beyond the original business activities. Companies looking for broader expansion options must consider other business structures in Thailand.

Furthermore, a branch office may create a Permanent Establishment (PE), which can trigger tax implications for the parent company.

Legal Requirements

Before setting up a branch office in Thailand, companies must secure a Foreign Business License. The application is reviewed by the Foreign Business Committee, and the process requires detailed documentation.

Although there is no set registered capital requirement, a minimum capital investment of 3 million Baht is necessary. The parent company must follow a specified schedule to bring this capital into Thailand:

• 25% of the required capital must be transferred within three months of opening the branch office.

• 50% of the capital should be brought in within the first year.

• The remaining 25% must be deposited within the second year.

If the branch office is intended to operate for less than three years, all of the capital must be transferred within six months of opening. If this requirement is not met, the government may close the branch office.

Setting Up a Branch Office: The Process

Establishing a branch office involves a detailed process, and submitting incomplete or incorrect documentation can lead to delays or even rejection of your application. Fortunately, Lotus Ledger can assist with the process to ensure everything runs smoothly.

To begin, you must apply for a Foreign Business License, which requires a thorough description of your business operations, including the type of business, its size, and the number of employees. You will also need to provide documents from the parent company, such as a list of directors and the Articles of Association.

The branch office must have a designated representative in Thailand, and the parent company must submit a power of attorney that authorizes this representative to act on its behalf. If the representative is a Thai national, a copy of their ID card is required, while a foreign representative will need to provide a copy of their passport and visa details.

In addition, the location of the office must be provided, often accompanied by a map to facilitate the registration process.

After the Ministry of Commerce reviews the application, it will be sent to the Foreign Business Committee for approval. The committee evaluates the application based on the following criteria:

1. Whether the business aligns with national security interests.

2. Whether it supports social and economic development in Thailand.

3. Whether it complements Thailand’s cultural, moral, and social values.

4. The impact the branch office will have on environmental conservation, consumer protection, and employment.

5. Whether the office will contribute to technological, research, and development initiatives.

Given the complexity of these criteria, it's important to ensure that your application is well-prepared and aligned with Thailand’s objectives. Lotus Ledger can help you navigate this process smoothly, increasing your chances of success.

Once your branch office is approved, you’ll be ready to begin operating in Thailand. 

Contact Lotus Ledger today to get a quote and start preparing your application.