Establishing a Representative Office (RO) in Thailand is a strategic choice for many foreign companies that wish to explore the Thai market without engaging directly in commercial activities. It allows businesses to conduct research, promote their parent company’s products, and facilitate relationships with local partners — all while maintaining full foreign ownership and control. This structure is ideal for companies seeking to understand Thailand’s economic landscape, build a network, and prepare for potential expansion through a limited company or branch office later on.
Understanding the Representative Office
A Representative Office in Thailand is a non-trading business entity established by a foreign company to engage in limited, non-revenue-generating activities. It does not have separate legal personality from its parent company but operates as an extension of it. The primary purpose of a Representative Office is to support the parent company’s operations, not to earn profits in Thailand.
Under Thai law, the activities of a Representative Office are strictly regulated by the Foreign Business Act B.E. 2542 (1999). As a foreign-owned entity, an RO must ensure that its activities comply with the Act’s restrictions on foreign participation in certain business sectors.
Permitted Activities
According to Thailand’s Department of Business Development (DBD) under the Ministry of Commerce, a Representative Office may only engage in the following five permissible activities:
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Sourcing goods or services in Thailand for the head office.
The office may collect information and facilitate the procurement of goods and services for the parent company’s use abroad. -
Inspecting and controlling the quality and quantity of goods purchased in Thailand.
This ensures that the goods meet the parent company’s quality standards before export. -
Providing advice concerning goods sold by the head office to agents or customers in Thailand.
The office can assist customers by offering product information or technical guidance. -
Disseminating information about new products or services of the head office.
This allows the office to promote and raise awareness of the parent company’s offerings without selling directly. -
Reporting business movements in Thailand to the head office.
The office can analyze market trends, monitor competitors, and provide updates for strategic decision-making.
Crucially, a Representative Office cannot generate income, issue invoices, or sign contracts on behalf of the parent company for commercial purposes. Its expenses must be fully funded by the parent company abroad.
Key Advantages of Setting Up a Representative Office
Although limited in scope, a Representative Office offers several advantages for foreign investors:
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100% Foreign Ownership
Unlike many business types restricted under the Foreign Business Act, a Representative Office can be wholly foreign-owned, providing full control to the parent company. -
Ease of Market Entry
Establishing an RO allows foreign companies to test the Thai market and build relationships before committing to a full-scale business setup. -
No Corporate Income Tax on Profits
Because an RO is not allowed to earn income, it is exempt from corporate income tax, except for taxes related to employee salaries (e.g., withholding tax and social security contributions). -
Simplified Operations
The structure of a Representative Office is relatively straightforward, requiring less complex accounting and compliance compared to a branch or subsidiary. -
Enhanced Local Presence
Having an office in Thailand enhances credibility with Thai customers and partners, allowing smoother communication and operations.
Requirements and Conditions
To establish a Representative Office in Thailand, the foreign parent company must satisfy several key requirements:
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The parent company must have been in operation for at least three years.
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The proposed activities must fall strictly within the five permitted categories.
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The office must have at least one chief representative responsible for operations.
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All expenses must be funded from abroad; no local income or financing is allowed.
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A minimum of two million Thai Baht (THB 2,000,000) must be remitted from overseas as working capital.
For Representative Offices that employ foreign staff, the company must also meet capital-to-employee ratio requirements — typically, at least THB 3 million per foreign employee to qualify for a work permit.
Registration Procedures
The establishment of a Representative Office involves several key steps:
1. Name Reservation
The first step is to reserve the office name with the Department of Business Development (DBD). The name should not conflict with any existing entities and should reflect the name of the parent company.
2. Application for Foreign Business License (FBL)
Since an RO constitutes a foreign business under the Foreign Business Act, it must obtain a Foreign Business License from the DBD before commencing operations. The application must include detailed information about the parent company, proposed activities, office location, and financial structure.
3. Registration with Tax Authorities
After receiving approval, the Representative Office must register for a Tax Identification Number (TIN) with the Revenue Department. Although it does not pay corporate income tax on profits, it must withhold and remit taxes for employees and comply with social security obligations.
4. Work Permits and Visas
Foreign employees must secure Non-Immigrant “B” visas and work permits. The RO must comply with Thailand’s labor laws, including the employment of at least one Thai employee per foreign employee, depending on the case.
5. Ongoing Compliance
The Representative Office must maintain proper accounting records and file an annual audit report with the DBD and Revenue Department, even if it records no income.
Capitalization and Financial Requirements
The minimum capital requirement for a Representative Office in Thailand is THB 2 million, which must be remitted from abroad in installments as follows:
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At least 25% within the first three months after commencing operations.
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Another 25% within the first year.
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The remaining 50% within the next two years.
The capital serves as operating funds for the office and cannot be treated as investment capital for profit-making activities. The funds must be used solely for approved operational expenses such as rent, salaries, and administrative costs.
Limitations and Restrictions
Despite its advantages, the Representative Office model has certain limitations that foreign investors must carefully consider:
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No trading or revenue-generating activities are allowed.
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Contracts for sales or services cannot be made on behalf of the parent company.
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Importation and exportation for sale are prohibited.
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The office must operate solely within the defined non-commercial scope approved by the DBD.
Violating these conditions can lead to license revocation and legal penalties under the Foreign Business Act.
Duration and Renewal
A Representative Office in Thailand does not have a fixed term of operation. However, it must notify the DBD of any major changes — such as a change of address, chief representative, or the parent company’s corporate structure. Renewal of the Foreign Business License may be required if the office expands or alters its scope of activities.
Transition to Other Business Forms
Many foreign companies begin with a Representative Office to gain market insight and later transition to a Thai Limited Company or Branch Office when they decide to engage in profit-making activities. Converting to another entity type involves registering a new company or applying for a new license under the Foreign Business Act.
Conclusion
Establishing a Representative Office in Thailand is an excellent first step for foreign companies aiming to enter the Thai market cautiously and strategically. It allows firms to gather market intelligence, promote products, and build strong local relationships while remaining fully foreign-owned and tax-exempt on profits.
However, because its operations are legally limited to non-commercial activities, businesses should carefully assess whether this structure aligns with their long-term objectives. With proper planning, compliance, and legal guidance, a Representative Office can serve as a valuable foundation for expanding into Thailand’s vibrant and growing economy.