ALG＆Associates (Thailand) Co., Ltd. -Legal and tax services in Thailand-

The Regulation of the office of the Prime Minister BE 2529 (AD 1986) defines a representative office as an office of a foreign company which is located in Thailand and in the business of trading internationally.

The Representative Office is a form of business organization defined by The Regulation of the Office of the Prime Minister BE 2529 (AD 1986) as a Thailand-based office of a foreign company that is in the business of international trade. It helps to facilitate the import and export of goods by its head office and it is characterized by the following features:

• It does not receive any revenue from providing services;
• It cannot receive purchase orders or make sales or negotiate business with third-parties;
• Its expenses are paid entirely by the head office;
• It is not subject to any corporate income tax, except for interest on any remaining funds that it has received from the head office that is deposited in its bank account.

Furthermore, a Representative Office is defined by government regulations as the office that a foreign company sets up in Thailand in order to engage in the international trading business. According to the Regulations of the Office of the Prime Minister Re: Establishment of a Service Center for Visas and Work Permits (No. 3) B.E. 2544 (2001), the international trading business is defined as consisting of the following activities, which are performed on behalf of the head office or affiliated companies:

• Reporting on business movement in Thailand;
• Providing advice related to products that are being sold to distributors or customers;
• Sourcing goods and services in Thailand;
• Inspecting and controlling the quality and quantity of goods purchased or ordered to be manufactured in Thailand;
• Introducing information regarding new products or services.

The Representative Office is strictly limited to the above five activities and may engage in any or all of them. However, according to an Announcement of the Revenue Department Re: Income Tax and Business Tax of a Representative Office of B.E. 2526 (1986), if the Representative Office were to offer services outside of this defined scope, then the Revenue Department would be empowered to subject the Representative Office to the regular Thai corporate income tax on all of the income it has received; this includes all of the support income that the Representative Office receives from its head office.

Furthermore, the following business activities are outside the scope of activities of a Representative Office:

• Making any purchases or payments or any related business transactions on behalf of the head office or affiliated companies;
• The export of any products ordered by the head office or affiliated companies;
• Performing quantity and quality control for unaffiliated companies;
• Performing after-sale services such as installation or maintenance;
• Providing advice regarding products that are produced by unaffiliated companies;
• Accepting purchase orders on behalf of the head office or affiliated companies;
• Coordinating the sales of products on behalf of the head office or affiliated companies;
• Publicizing products or services which are already available in Thailand;
• Acting as an agent or distributor between the head office or affiliated companies;
• Performing any planning or coordination with other entities on behalf of the head office or affiliated companies;
• Acting as the agent of the head office or affiliated companies in any contracts or any business transactions;
• Making business reports to unaffiliated companies.