Are there any benefits of a regional office (Representation Office)?

[tenhoursaway]

New thread since I can't reply to my former question: Is there any requirement, to have Thai personnel in a Regional Office?

Sunbelt Asia answered: "Thai officials expect your office to help the economy through employment and technology knowledge transfer. So, yes, Thai employees are required as the foreign entity is expected to educate the Thai labor force through the dissemination of knowledge."

Thanks for that.

That's what I was afraid of, since the company wants to educatethe existing local (3rd party) distributor network in Asia, and not own staff. Anyway, if a regional office - a company under foreign jurisdiction - is forced to employ local personnel, the evaluation of neighboring countries might just be back on the table.

So, what are the benefits of a regional (or representation) office (R.O.) or over a limited liability Company (Co. Ltd.)?

Currently I see disadvantages only -- or do I miss something?

Benefits of a Co., Ltd. / Disadvantage of R.O.

Ltd.: Set up in less then 7 days.
R.O.: Set up process needs more then 2 month.

Ltd.: Just a few forms required to setup a Co., Ltd.
R.O.: The list of documents required for the setup is extensive.

Ltd.: No time limitation.
R.O.: R.O. License needs to be renewed every 5 years.

Ltd.: Low government registration fees: (about 6500THB fo1 1m registrered capital)
R.O.: High registration fees: Application fee (2000) + Registration fee (20,000 - 250,000)

Ltd.: Virtually any amount can be registered, however per Work Permit at least 1m (if married to Thai) or 2m (if not) are required.
R.O.: 5m Baht in the first two years, thereof at least 2 m Baht in the 1 year, and 1m baht in the first six month have to be spent.

Ltd.: Can apply for BoI promotion. (One Stop Office, Tax Benefits, 100% foreign ownership, so no need for ABL)
R.O.: Cannot apply for BoI promotion.

Ltd.: Does not need a alien business license in every case.
R.O.: Has to apply for a alien business license.

Ltd.: Can trade, and generate income.
R.O.: Can not trade, or generate income.

Ltd.: low documentation requirements
R.O.: high documentation requirements

Ltd.: Can file VAT
R.O.: Cannot file VAT

Ltd.: No technology/knowledge transfer required (even this is the major target of the business)
R.O.: Technology transfer plan has to be provided.


NO DIFFERENCE between Co. Ltd. and R.O.
Ltd.: needs 4 Thai employees per WP
R.O.: needs 4 Thai employees per WP

Ltd.: has to file CIT
R.O.: has to file CIT

Ltd.: has to file audited accounts
R.O.: has to file audited accounts


Benefits of R.O. / Disadvantage of Co. Ltd.

---> Are there any.... ????

[Sunbelt Asia]

Hi

First let me give a more complete explanation of a Representative or Branch office

Representative Office – Regional Office – Branch Office is a type of juristic entity which allows an offshore company to establish their own office in Thailand with restricted business activities. There are only 5 business objectives allowed for a Representative Office. They are:



OBJECTIVE 1. To report the business movements in Thailand to the head office or affiliated company or the group company;

OBJECTIVE 2. To give advice on various aspects pertaining to the goods distributed by the head office or affiliated company or the group company to the distributors or the users;

OBJECTIVE 3. To seek for the supply source of goods or services in Thailand for the head office or affiliated company or the group company;

OBJECTIVE 4. To inspect and control the quality and quantity of goods that the head office or affiliated company or the group company purchased or hired to manufacture in Thailand;

OBJECTIVE 5. To disseminate the information in relation to the new goods or services of the head office or affiliated company or the group company;



These objectives are just a broad description, the applicant would also need to consider other less broad (but important) terms and condition.



Some of the many factors that the official would look into in granting a license to operate would be 1.What are the contributions that this Alien Business making into the Thai economy? ex;: employment, technology transfer. 2. How could Thailand benefit from allowing this foreign entity to establish an office in Thailand?



Benefits for Regional or Representative Office (any type of branch office for Offshore companies)?


Usually they are established as an internal factor of an offshore company:

1. Company’s policy that when they expand, they must maintain their ownership, they would not accept 51%-49% format

2. Company is just trying to create brand awareness

3. In certain countries, there are proposed tax incentive to companies that establish a representative office to achieve corporate tax incentive from their home country.



Advantage of this type of juristic entity:

1. Work permit (Thai to foreign ratio) is 1 Thai : 1 work permit



Disadvantage of this type of juristic entity:

1. Lengthy approval & preparation process

2. Higher government (approval) fees (they are calculated by the registered capital of the HQ)

3. Limited business scope (you can only do what you are approved to do)

4. Limited number of work permits (Min. of 2 work permit and max. of 5 work permit depending on the category applied)

5. Cannot generate any form of income (money used for operating expenses must be from funding [cash injection] from HQ)

Hope this explains why overseas companies will set up this type of company and if it suits your needs or not. Please feel free to come in for an initial free legal consultation if you have any further questions

[sunbeltlegal][/sunbeltlegal]