Representative Office in Thailand

Thailand is one of Southeast Asia’s most attractive destinations for foreign businesses seeking regional expansion. With its strategic location, developed infrastructure, skilled workforce, and strong connectivity to ASEAN markets, many foreign companies look to Thailand as an entry point. For businesses that wish to explore the market or support overseas operations without engaging in revenue-generating activities, establishing a Representative Office (RO) is often the most practical and compliant option.

A Representative Office allows a foreign company to maintain a legal presence in Thailand while limiting its activities to non-commercial functions. Understanding the scope, requirements, benefits, and limitations of this structure is essential for companies planning to enter the Thai market.

What Is a Representative Office?

A Representative Office in Thailand is a legally recognized business structure for foreign companies that wish to conduct non-profit, non-income-generating activities in the country. Unlike a Thai limited company or branch office, a Representative Office cannot earn income, issue invoices, or sign commercial contracts with Thai customers.

Instead, it operates solely to support the foreign head office and acts as an extension of that entity. The Representative Office does not have separate legal personality; all liabilities and obligations ultimately rest with the foreign parent company.

Permitted Activities of a Representative Office

Thai authorities strictly regulate the activities of a Representative Office. Under current regulations, a Representative Office is permitted to engage in only the following functions:

1. Sourcing goods or services in Thailand for the head office

2. Quality control and inspection of goods produced or sourced in Thailand

3. Providing information about products, services, or business operations of the head office

4. Advising or assisting local agents or distributors of the head office

5. Conducting market research and feasibility studies

Any activity beyond these functions—such as selling goods, providing paid services, or receiving income in Thailand—may result in penalties, license revocation, or forced conversion to another business structure.

Activities Strictly Prohibited

A Representative Office is not allowed to:

• Generate revenue in Thailand

• Accept purchase orders or issue invoices

• Sign sales contracts with customers

• Negotiate prices or conduct direct marketing sales

• Engage in manufacturing or trading activities

Because of these limitations, the Representative Office is best suited for companies in the exploratory or preparatory stage of entering the Thai market.

Legal Framework and Licensing

Establishing a Representative Office in Thailand requires approval from the Department of Business Development (DBD) under the Ministry of Commerce. Because it involves foreign ownership, the application process is governed by the Foreign Business Act (FBA).

Foreign companies must apply for a Foreign Business License (FBL) or permission to operate as a Representative Office. Approval is discretionary and based on factors such as:

• The credibility and financial strength of the head office

• The nature and necessity of the proposed activities

• The economic benefit to Thailand

• Compliance with regulatory requirements

The approval process can take several weeks to a few months, depending on the complexity of the application.

Capital Requirements

A Representative Office must meet minimum capital requirements set by Thai authorities. While the capital is not used for investment or profit, it is intended to cover operational expenses such as salaries, rent, and administrative costs.

Typically:

• A minimum capital of THB 2–3 million is required

• Capital must be remitted from overseas

• Capital is usually injected in stages over a specified period

Failure to meet capital remittance requirements may result in non-compliance issues or revocation of approval.

Staffing and Employment

A Representative Office may employ both Thai and foreign staff, subject to Thai labor and immigration laws.

Key considerations include:

• At least one authorized representative or manager must be appointed

• Work permits are required for all foreign employees

• The ratio of Thai to foreign employees may apply depending on the role

• Compliance with Thai labor law, social security, and tax obligations is mandatory

Although the Representative Office does not earn income, it is still required to properly manage payroll and statutory employment obligations.

Taxation of a Representative Office

Because a Representative Office does not generate revenue, it is not subject to corporate income tax on profits. However, it is not exempt from all tax obligations.

Common tax responsibilities include:

• Withholding tax on salaries and certain payments

• Personal income tax for employees

• Social security contributions

• Possible specific business tax or VAT registration, depending on circumstances

Accurate accounting and tax filings remain essential, even in the absence of income.

Advantages of Establishing a Representative Office

Establishing a Representative Office offers several strategic benefits for foreign businesses:

1. Low-risk market entry – No commercial exposure or sales obligations

2. Regulatory clarity – Clearly defined scope of permitted activities

3. Brand presence – Legal and physical presence in Thailand

4. Market intelligence – Ability to conduct in-depth market research

5. Preparation for expansion – Ideal stepping stone to a branch or Thai company

For companies unsure about long-term investment, a Representative Office provides a controlled and compliant way to assess market potential.

Limitations and Challenges

Despite its advantages, a Representative Office has notable limitations:

• Inability to generate revenue

• Restricted business scope

• Ongoing compliance and reporting requirements

• Dependence on overseas funding

• Conversion required if commercial activities are later pursued

As business needs evolve, many companies eventually transition from a Representative Office to a branch office or Thai limited company.

Conversion and Exit Options

If a foreign company decides to begin commercial operations, the Representative Office must be formally closed or converted. This typically involves:

• Deregistration with the DBD

• Tax clearance

• Employee termination or transfer

• Establishment of a new legal entity

Proper planning ensures a smooth transition and minimizes regulatory risk.

Conclusion

Establishing a Representative Office in Thailand is an effective and legally compliant option for foreign companies seeking a non-commercial presence in one of Asia’s most dynamic markets. It allows businesses to explore opportunities, support overseas operations, and build local knowledge without the financial and regulatory burdens of full commercial operations.

However, due to strict activity limitations and regulatory oversight, careful planning and legal guidance are essential. When structured and managed correctly, a Representative Office can serve as a strategic foundation for future growth and long-term success in Thailand.