Establishing a branch in Thailand can be more complex, expensive and quick compared to setting up a limited liability company. However, the advantage of a branch is that it can be 100% foreign owned.
Foreign companies wishing to set up a branch must also obtain a foreign business license and comply with regulations under the Foreign Business Act. The law draws a clear line on the activities regulated and reserved for foreign companies. While some sectors are completely off-limits to foreign entities, others are open with explicit permission from a designated government agency.
Setting up a branch in Thailand is often seen as more complex, expensive and timely than setting up a limited liability company, but as the branch is considered an extension of one’s overseas head office, so it can be owned at 100% by foreigners and will have no shareholders separate from those of the head office.
Since the branch office is an extension of the head office, this business entity is permitted to generate income in Thailand and must meet the requirements specified in the Foreign Business Act 1999, such as obtaining a business license. foreign company (FBL) and VAT registration. . In addition, the head office is held responsible for the debts of the branch.
Thailand’s Foreign Companies Act 1999 limits the activities that foreign companies can engage in and is therefore restricted to Thai nationals only. Three lists are annexed to the Foreign Business Law.
- List 1 – commercial activities prohibited to foreigners for specific reasons (eg animal husbandry, fishing, agriculture or horticulture, land trading).
- Name two – business activities related to national security, natural resources or traditional crafts. These activities require special Cabinet approval (for example, manufacture, distribution and maintenance of firearms, wood carvings, manufacture of Thai musical instruments, rock salt mining, furniture production and mining activities).
- List three – business activities where Thai nationals are currently unable to compete with foreign businesses. However, foreign companies will need approval from the Thai Ministry of Commerce to engage in third list activities (e.g. rice milling, forestry, legal services, accounting, engineering, tourism, advertising and selling products food and drink).
What are the requirements to open a branch in Thailand?
The parent company will need to meet the following criteria with the Thai Ministry of Commerce before establishing the branch.
A copy of the company’s incorporation documents, board members, official registered office and business objectives.
Appointment of an agent to head the branch
A letter indicating the appointment of an agent who will run the branch. The individual can be a Thai national or a foreigner. If a foreigner is nominated, they will need to submit their passport details and proof of permission to enter and stay in Thailand.
A statement on the type of business activities and type of business license, including size of operations, size of workforce in Thailand, and a statement on how Thailand will benefit from the business operation .
Apply for a foreign business license
After fulfilling the mentioned criteria, the branch must then apply for a foreign business license in the category that best matches the business activity of the business. Obtaining an FBL generally takes 60 days from the date of filing the application. Once approved, the branch will be considered legally registered.
Each application submitted to the Ministry of Commerce is considered on its own merits and, as mentioned, the parent company will have to show how the branch will benefit Thailand.
When the application is accepted by the Ministry of Commerce, it will be reviewed by the Foreign Business Committee within 60 days of acceptance.
If an application is rejected, the Ministry of Commerce will notify the applicant within 15 days in writing, stating the explicit reason why the application was rejected. Businesses can appeal this decision, but this must be done within 30 days from the date the applicant received the rejection notice.
Minimum capital required
The minimum capital required is 3 million baht (84,295 USD). No less than 25% of this amount must be brought into Thailand within three months of approval. During the same operating year, 50% must be returned and the remaining 25% must be returned the following year.
ASEAN Briefing is produced by Dezan Shira & Associates. The company assists foreign investors throughout Asia and has offices throughout ASEAN, including Singapore, Hanoi, Ho Chi Minh City and Da Nang in Vietnam, Munich and Essen in Germany, Boston and Salt Lake City in the United States, Milan, Conegliano and Udine in Italy, in addition to Jakarta and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines and Thailand as well as our firms in China and India. Please contact us at [email protected] or visit our website at www.dezshira.com.