Under the Thai Foreign Business Act (“FBA”), A.D. 1999, foreigners who engage in certain business sectors, including any service business, require a Foreign Business License (“FBL”) to operate legally. However, under the new Ministerial Regulation of the Ministry of Commerce, a Regional Office is not considered a restricted business under the Foreign Business Act (FBA). Therefore, regional offices do not need to apply for a foreign business license to operate in Thailand.
Regional Offices are considered the same legal entities as their head offices and perform their businesses in Thailand on behalf of its head office abroad.
Permitted scope of activities
Similar to the Representative Office, Regional Offices are also restricted from earning income, purchasing, selling, and negotiating. Under the new Ministerial Regulation of the Ministry of Commerce, a Regional Office is not considered a restricted business under the Foreign Business Act (FBA). Therefore, regional offices do not need to apply for a foreign business license to operate in Thailand. However, a legal entity number is required from the Ministry of commerce.
Regional Offices also have to abide by Capitalization rules under the FBA. It must be at least 25 percent of the average estimated expenses for the first three years but not less than THB 3,000,000.
In contrary to a company limited, Regional Offices must not:
– Derive any income from its activities. (Should the company make any profit, such profit must be allocated to the head office);
– Have the authority to accept a purchasing order or to make a sales offer;
– Negotiate / Enter into business arrangements with any natural or juristic person in Thailand.
After successful registration, the Regional Office is subject conditions as follows:
– The total debt of the Regional Offices must not exceed seven times the amount of the capital owned by shareholders or the business owner.
– Funds used to finance the Regional Office must be remitted abroad. Over a five-year period after successful registration of the Representative Office, at least 5,000,000 THB must be invested into the Regional Office. 2,000,000 THB must be remitted in the first year, and 1,000,000 THB must be remitted in the first six months. After the first year, at least 1,000,000 THB must be transferred to the Regional Office each year until the full amount of 5,000,000 THB has been transferred.
– At least one person responsible for the operation and management of the Regional Office must reside in Thailand.
A foreign company may apply for a permit to establish a Regional Office at the Department of Commercial Registration at the Ministry of Commerce – Alien Business Section. Such permit is valid for five years and subject to a registration fee of 5 THB for every 1,000 THB of registered capital (maximum of 5,000 THB).
The establishment of a Regional Office in Thailand usually takes about 2-4 weeks.
Visa and work permit requirements for employees
The Department of Commercial Registration will provide support to companies transferring their foreign staff to Regional Offices in Thailand and also helps with securing necessary visas and work permits. Regional offices must maintain a 1 to 1 ratio of Thai-to-foreign employees for all foreign staff (whether authorized persons or not) that require Non-Immigrant “B” visas.
Note: The regional office can only serve the main office’s branches and subsidiary companies; it cannot serve third-party clients.
Feel free to contact us if you have any questions related to this matter at [email protected]
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Fabian, a founding partner of FRANK Legal & Tax, is a German-trained lawyer with expertise in corporate/commercial and real estate law, and litigation, and has been living and working in Thailand since 2005.