Opening A Branch Office

[jtb]

I am considering establishing a branch office of my UK-based company in Bangkok, providing technical facilities to the conference industry (sound reinforcement, staging, lighting etc). Having scoured the internet for information, I think I am right in assuming that the work falls within the 'permissible' category for foreign companies and that the 'branch office' option is the simplest route to take. However, can anyone enlighten me on the following two points:

1. Although obviously desirable from my point of view, is it actually a legal requirement for at least one employee to be domiciled in Thailand?

2. Do any of the employees have to be Thai nationals?

If anyone could answer these two points (or alert me to any other potential pitfalls), I would be very grateful.

JtB

[ThaiAdventure]

The BOI is a good source of general information about company formation in Thailand. Although I am not directly answering your questions. From your description, it seems that you would need to think very carefully about what you are intending to do and decide what type of presence you wish to employ. It may be,for example, that you would be better off creating a Thai company and subcontracting work from the UK to them!

excerpt From BOI:

http://www.boi.go.th/english/business/proc...ab_company.html

D. Other Forms of Corporate Presence

Branches of foreign companies. There is no special requirement for foreign companies to register their branches in order to do business in Thailand. However, most business activities fall within the scope of one or more laws or regulations which require special registration, either before or after the commencement of activities. Foreign business establishments must, therefore, follow generally accepted procedures. It is important to clarify beforehand what constitutes income subject to Thai tax because the Revenue Department may consider revenues directly earned by the foreign head office from sources within Thailand as subject to Thai taxes.

As a condition for approval of an Alien Business License to a branch of a foreign corporation, working capital amounting to a total of five million baht in foreign exchange must be brought into Thailand within certain intervals over a four-year period.

The branch may be allowed to operate for a period of five years, unless a shorter period is indicated in the application as a result of a contract to be performed in Thailand. Extension of the original duration of the license to operate may be granted, provided the working capital required to be brought into Thailand is met.

A representative office of foreign corporations may also be established to engage in limited ?non-trading? activities, such as sourcing of goods or services in Thailand for its head office or inspecting and controlling quality of goods which its head office purchases in Thailand. Other activities can cover disseminating information about new products and services of its head office, and reporting to its head office on local business development and activities.

The working capital contributions as discussed above in respect to branches apply.

[Indo-Siam]

Hi jtb -

The legal requirement is that one foreigner be domiciled in Thailand, and operate under power of attorney from Head Office. However, the concept of "domiciled here" just means that you are paying taxes here (not necessarily receiving the salary - but at least paying taxes on the amount), and that you obtain a work permit and associated extended non-immigrant entry permit. Your warm body can be anywhere. But - remember - in order for anything here in Thailand to happen, the holder of the Power of Attorney must sign - Regional Offices have no company seal, or directors - everything requires the POA holder to sign.

With that said, I am presently working with an established UK firm who had a second person signed to a POA - a Thai - and they have operated for years with no significant problems - much of that time with no farang even in the picture. But this was at a corporate level that had Deloitte & Touche handling their Thai paperwork.

Second question - you are not required to hire any Thais.

It seems to me that your questions indicate a desire to operate with no foreigners and no Thais - ????? main business being operation of a bank account? In the process of setting up the Office, you will need to submit a description of how the office will be run in Thailand, including a description of intended staffing plan, salaries, etc.

Do you clearly understand that a Regional Office cannot invoice or collect any funds from clients/customers inside Thailand? All money associated with running a Rep or Regional office must flow one way only - from overseas, through the office - to Thai landlords, company employees, and all the rest. No invoicing, no collection.

One other thing to understand - the paperwork drill to open a Thai Regional or Rep Office is not for the feint of heart. You will hvae to undergo thorough screening of your UK parent company by a Thai diplomatic post in the UK - they will require you to submit copies, translated into Thai, of company incorporation documents, right down to a map to your corporate HQ. You will also need to prepare in Thai an affidavit describing your parent company (in a specific format), a power of attorney in both languages, and a description of proposed Thai office. I understand (but am not certain) that if your overseas head office appears "questionable", they will require that you also submit translated copies of your last couple of years worth of audited financial reports.

In my opinion, it is more difficult (and takes much longer) to open a Rep/Regional Office than it does to start a Thai Private Co. Ltd.

Good Luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

www.thaistartup.com

[jtb]

Many thanks for the prompt responses and info.

Indo-Siam - I did specify 'Branch' as opposed to Rep or Regional. Does your info re. POA and domicile still apply in this instance? I've no hidden agenda about just running a bank account - I'm completely flexible at this stage and just want to establish all the options open to me.

Thanks again.

JtB

[Indo-Siam]

Hi jtb -

Thailand recognizes several different corporate entitities. I will use the English terms commonly used in translating the Thai equivalents.

Thai Private Co. Ltd. (TPCL) - Requires seven individuals to form at outset ( a corporation cannot be a shareholder of a start-up - it must be individuals). Minimum capitalization is 1,000,000 baht (2,000,000 needed if a foreign work permit will be sought). This entity is taxed on profits (30% flat rate). This entity can invoice and collect from Thai clients. In most cases, obtaining a work permit requires four Thai employees, plus 2,000,000 baht in paid in capital per work permit.

Thai Representative Office / Thai Regional HQ - Formed by an overseas corporation. Is not allowed to issue invoices to or collect income from customers inside Thailand. Is not liable for corporate income tax. Requires that top manager be a foreigner domiciled inside Thailand, who exercises signature authority for overseas Head Office, based on a power of attorney. My obtain work permits for several foreigners without any Thai employees. Requires that all funds to operate office be remitted fromn outside Thailand. Formation involves very significant due diligence submissions to Thai diplomatic office in country where Head Office is located.

So - you need to define "Branch Office" in terms of one of the above options. I suspect that you will want to open a TPCL - JTB (Thailand) Co. Ltd.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

www.thaistartup.com

[jtb]

Hi Indo Siam

The Ministry of Foreign Affairs Handbook refers to Regional, Rep. and Branch offices. The first two are non-starters for the reasons you point out, but the Handbook (also quoted earlier by ThaiAdventure) describes a Branch office of an overseas-based company as follows:

" Branches

There is no special requirement for foreign companies to register their branches in order to do

business in Thailand. However, most business activities fall within the scope of one or more

laws or regulations, which require special registration, either before or after the

commencement of activities. Foreign business establishment must, therefore, follow

generally acceptable procedures. It is important to clarify beforehand what constitutes income

subject to Thai tax because the Revenue Department may consider revenues directly earned

by the foreign head office from sources within Thailand as subject to Thai taxes.

As a condition for approval of an Alien Business License to a branch of a foreign

corporation, working capital amounting to a total of five million baht in foreign exchange

must be brought into Thailand within certain intervals over a five-year period.

The branch may be allowed to operate for a period of five years, unless a shorter period is

indicated in the application as a result of a contract to be performed in Thailand. Extension of

the original duration of the license to operate may be granted, provided the working capital

required to be brought into Thailand is met."

Unless I'm being a bit slow (it wouldnt be the first time!), this looks like a simpler option than going down the TPCL route.

Am I talking sense?

Many thanks for your time.

JtB

[ThaiAdventure]

It does look simpler until you look at the stipulations for the Alien Business licence. That is why I said that you need to consider exactly what you are planning to do! Like most things in Thailand, (from what I have seen) things look straight forward enough but it always ends up at the same sticking point....the work permit for you to sign your checks.

[Indo-Siam]

Hi jtb -

What you cited was the exact same rule that applies to Representative Office, Regional HQ, or what you call a "Branch Office". They are all treated the same.

The Alien Business License is the thing that you must get, AFTER you have formed a business entity that can APPLY for the ABL. For starters, you must submit a three year financial projection, in a specific format - detailing anticipated expense categories for about 10 different areas. There is no requirement to do any of this stuff in order to create an TPCL.

You also must submit copious documentation - not in Thailand - but to a diplomatic post in your home country - BUT IN THAI LANGUAGE - in order to be eligible to apply to open an office in Thailand. Translation of documents alone can be as expensive as forming a TPCL.

The major advantages to setting up a Rep/Regional/Branch office are that you do not need to have any Thai employees to qualify for a work permit, and you do not need to hunt up seven shareholders. The main disadvantages are that you cannot collect revenue inside Thailand - and the start-up process is much more tedious.

But - you will have to find your own "best solution," based on your situation.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

www.thaistartup.com

[jtb]

Hi Indo-Siam

Many thanks for all the advice. I'll post a report on progress (or lack of it!) in due course.

Best wishes

JtB

[ThaiAdventure]

What you cited was the exact same rule that applies to Representative Office, Regional HQ, or what you call a "Branch Office". They are all treated the same.

I disagree.

Branch and representative offices have distinctly different functions.

The major difference between a representative office and a branch office is that a branch office is allowed to sell and invoice (rep offices are only allowed to report market trends, provide advice to its head office on marketing or seek suppliers & services). This is the crunch though, licences/permits for branches are only granted on a per contract basis (if at all) and for a mximum of 5 years (the Ministries can also apply arbitrary restrictions).

Another alternative that has not been discussed so far is BOI approval. The BOI have the ability to waiver many of the restrictions imposed on foriegn companies and give tax incetives for import and export as well as granting unlimited work permits. It is a slow and laborious process (can take anywher from 1- 6 months) but is perhaps another area you can explore.

One more thought before I wind up. I mentioned in an earlier post that you could set up a Thai company and subcontrct work to them. You could also do the reverse if you used a rep office to find a "supplier" which you could then offer consultancy to!!!!!

[Indo-Siam]

TA -

Please look at Foreign Entities in Thailand Section 4, and show me where the term "Branch Office" appears. As far as I know, this English term has no separate meaning in Thai Business Law - it is only a descriptive term applying to a business registered under a different legal category, and then described using that term, because of some relation to another business.

Looking carefully at Section 4, there is only one structure that allows income to be earned - but it requires initial capitalization at a minimum of 10 million baht.

There is no such thing as"Branch Office". If you mean "Agent Office" - that is clearly defined. But it may not earn revenue.

Note that there is a reference to "branch offices" under the terms "Regional Office" and "Regional Operating Offices" - but these are referring "third person" to branch offices of the parent company within the region - and is not referring to one of the structures in the Thai law.

The other thing to look at is Business Regsitrations Look specifically at Section. 8 (3) - the term "branch office" again appears. But it is again a descriptive term - and there is no procedure identified for registering such an entity, other than by using the standard choices: Limited Partnership, Thai Private Co. Ltd., etc.

I would be most interested in being referred to any Thai law concerning registration of an entity known as a "Branch Office" under provisions different from the two I have cited - to my knowledge, these two cover all the possibilities - none of which include "branch office" as a distinct procedural choice.

Cheers!

Steve

Indo-Siam

[ThaiAdventure]

Hi IS.

I refer you to my previous posting from the BOI.

In particular

Section D. Other Forms of Corporate Presence.

Section E. Regional Offices

and section F. Regional Trade and Investment Support Offices

As for how you go about setting up one of these configurations, thats what you pay lawyers for!. But i would hazard a guess that it would come under section 7 of

Foreign Entities in Thailand page you cited(7. Lodging of the request for the business operation permit)

[Butterfly]

Hi Indo-Siam

Many thanks for all the advice. I'll post a report on progress (or lack of it!) in due course.

Best wishes

JtB

Why would you want to setup a branch office here ? a pain in the ass for what ? unless you plan to "launder" money, I don't see the purpose. Just rent an office and you will be set up. You are not really working for anyone anyhow, but only for yourself, and you get paid outside Thailand, so I don't see how they could claim to collect tax from you, they have no juridiction.

[Indo-Siam]

Hi TA -

The BOI regulation is in fact referring to the procedures for registering what in the translation of the 1999 Foreign Business Act is called an "Agent Office" - and what can also be translated as "Representative Office" (Agent Office = Representative Office = Representative Agent Office - pick your dictionary).

The Agent Office cannot earn income from Thai sources.

You may disagree, and believe that a "Branch Office" can be established under provisions of Thai law in way that can invoice and earn income here. My stand is that this is not possible.

I have dealt with the BOI extensvely over the past 45 days - they do not register companies. Period. That is a reponsibility of the Ministry of Commerce - Department of Business Registration. Every registration process starts with a Thai form. There is no form for regsitering a "Branch" entity that can earn income here, and is not a TPCL or Ltd. Partership.

What I will agree to is that weird things can happen if you have a high-level Thai working on your behalf - such as having the law firm of a Member of Paliament handling your registration (as one of my Rep Office clients for other services had done, in originally establishing their firm).

Working with the BOI can be extremely difficult - and some of the sector representatives are VERY corrupt - as I just learned in dealing with the "Metal Products Manufacturing" group.

My clearly stated bottom line: It is not possible to register a "Branch Office" in Thailand that can earn income here - there is not a process for that. BOI included.

You can register an entity that acts on behalf of an overseas parent company - but it cannot earn income here. Or you can register a conventional entity here - Ltd. Partnership or TPCL - which can earn income here. This are your choices. Period.

AFTER you have a company established, you can try to get special privileges through the BOI - and all things may be possible. But - dealing with the BOI is a much more rigorous undertaking, and they pretty much sneer at capitalizations under 10 million baht - except in the software/telecom/high-tech sector (particularly in relation to the Software Park Thailand). (Note: I am aware that officially, BOI considers any company that meets minimum 1,000,000 capitalization requirements - but that is on paper. In reality, they won't even look at companies with minimal capitalizations).

Steve Sykes

Managing Director

Indo-Siam Group

www.thaistartup.com

[ThaiAdventure]

IS.

Quote from Section D.

There is no special requirement for foreign companies to register their branches in order to do business in Thailand.

So does there have to be a form to register Branches when they don't have to be registered?????

The discussion is becoming a bit acedemic and not helping JTB.

I dare say you have a team of lawyers at your disposal which can guide you much better than I.

I will say this from my experiences of Thai lawyers though, they have great difficulty thinking outside the box and if they can do it the easy way...they will.

JTB

I think from the discussion that you can see that nothing is particularly easy in Thailand when it comes to farang.

What is fairly obvious though that IS and myself both agree on (as I stated in my first post ) that probably the best way forward would be to start a Thai company and sub contract to the UK. This however, may not achieve you business goals.

If you do decide to go down this route you will need either to employ a "trusted" Thai Director to have full financial control (DON'T DO IT) or 4 employees, capitalisation at THB 2M and a work permit. Oh and 7 thai promoters. Make sure you get notarised english translations of ALL thai documents before you sign and never take anything at face value (even from a lawyer). I learnt the hard way and I hope that you do not!

[ThaiAdventure]

Just rent an office and you will be set up.

He would still need a work permit .

And yes they will tax him on the income derived from within Thailand regardless of employer base....but thats a whole new thread.

[jtb]

ThaiAdventure

It seems that this topic has gained it's own momentum without any further input from me! All interesting and thought-provoking stuff.

I had a long meeting with colleagues this weekend and, having taken all the postings here into account, along with info gleaned from other sources, it appears that a TPCL is probably the way forward. We shall see!

ATB

JtB

[thomasjojo]

you can hire me...

cheap of course...

thomas