Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
Investment in real estate in Thailand by a foreign person does not constitute a permanent establishment ('PE') unless the real estate is used as a fixed place of business through which the foreign person operates its business wholly or partly in Thailand. However, income derived from the real estate eg rent or capital gain is subject to tax in Thailand regardless of whether the foreign person has a PE in Thailand or not.
There are various types of PE recognized by the Thai tax authority and, from a tax perspective, the PE may or may not have to be registered with the Ministry of Commerce.
A type of PE that would need to be registered with the Ministry of Commerce is a branch office of foreign company. The cost and time involved in setting up a branch depends on the size and complexity of the business which the branch will be carrying in Thailand.
Other types of PE, including branch offices, may be required to apply for a foreign business permit depending on business activities to be carried on in Thailand.
