Establishing a Representative Office in Thailand is a popular option for foreign companies seeking to explore business opportunities in the Kingdom without engaging directly in income-generating activities. It provides a cost-effective and legally compliant way for foreign investors to gather market information, liaise with local partners, and support their parent company’s operations abroad. Understanding the structure, permitted activities, and registration procedures is essential for ensuring compliance with Thai law.
1. Overview of a Representative Office
A Representative Office is a non-trading business entity established in Thailand by a foreign company. It acts as a liaison or coordination office that performs specific support activities on behalf of its head office overseas. Importantly, a Representative Office cannot generate income, engage in trade, or enter into sales contracts in Thailand. Its operations are entirely funded by its parent company, and all expenses are covered through remittances from abroad.
Under the Foreign Business Act B.E. 2542 (1999) (FBA), a Representative Office is treated as a “foreign business” and must obtain a Foreign Business License (FBL) or Foreign Business Certificate (FBC) from the Department of Business Development (DBD), Ministry of Commerce, before commencing operations.
2. Permitted Activities
A Representative Office in Thailand is limited to five specific business activities, as prescribed under the Ministerial Regulation issued pursuant to the FBA. These activities are designed to support the parent company’s business without engaging in revenue-generating operations. They are:
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Sourcing or procuring goods or services in Thailand for the head office.
The RO can collect market data, identify suppliers, and coordinate procurement for its parent company abroad. -
Checking and controlling the quality and quantity of goods purchased or manufactured in Thailand for export by the head office.
The office may oversee quality control and ensure compliance with international standards. -
Providing advice concerning goods sold by the head office to Thai distributors or customers.
The RO may offer technical support, product training, or after-sales service information but must not charge fees for such services. -
Disseminating information concerning new products or services of the head office.
This includes promotional or informational activities about the parent company’s products — without direct marketing or sales. -
Reporting to the head office on business trends and movement in Thailand.
The RO can conduct market research and analysis to help the parent company make business decisions.
Any activity beyond these five categories would be considered commercial in nature and thus prohibited for a Representative Office.
3. Characteristics and Legal Restrictions
A Representative Office is not a separate legal entity but an extension of the foreign parent company. It does not have independent legal status and must operate under the parent company’s name. Because of this structure, the RO is restricted by several important legal conditions:
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No income generation: The RO cannot receive payment for services, sell goods, or issue invoices in Thailand.
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No commercial contracts: It cannot sign contracts on behalf of third parties, except for employment or service contracts related to its permitted functions.
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No import/export for profit: It may import goods solely for demonstration or testing, not for commercial distribution.
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All expenses funded from abroad: The parent company must remit funds to cover operational costs, such as rent, salaries, and utilities.
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Tax exemptions: Since it generates no revenue, the RO is generally exempt from corporate income tax, except for certain withholding taxes (e.g., on employee salaries).
These limitations make the Representative Office ideal for market entry, research, and liaison functions, rather than direct business operations.
4. Advantages of a Representative Office
Despite its restrictions, establishing a Representative Office offers several advantages for foreign companies:
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Low-risk market entry: It allows foreign investors to test the Thai market before committing to a full business presence.
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Ease of management: ROs have simpler accounting and reporting obligations compared to subsidiaries.
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No corporate tax liability: Because they do not earn income, ROs are exempt from most taxes.
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Facilitates future expansion: Once market conditions are favorable, the parent company can later convert the RO into a branch or limited company.
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Local presence: Having a local office improves credibility and communication with Thai suppliers, authorities, and customers.
5. Application and Registration Process
The process for setting up a Representative Office in Thailand involves several key steps administered by the Department of Business Development (DBD) under the Ministry of Commerce.
Step 1: Prepare required documentation
The applicant must prepare the following documents (translated into Thai and certified by a notary public or Thai Embassy):
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Certified copy of the parent company’s Certificate of Incorporation and Memorandum of Association
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List of directors and company affidavit from the parent company
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Power of Attorney authorizing a local representative or manager in Thailand
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Details of the intended activities and operational plan
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Office address and lease agreement in Thailand
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Financial statements of the parent company for the last three years
Step 2: Submit application to the DBD
Applications for a Foreign Business License (FBL) or Foreign Business Certificate (FBC) are submitted to the Department of Business Development. The approval process usually takes 30–60 days, depending on the completeness of documentation and the nature of the business.
Step 3: Capital requirements
The RO must have a minimum registered capital of 3 million Thai Baht, to be remitted from the parent company in stages:
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25% within the first three months after approval,
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50% within the first year, and
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100% within the third year.
This capital must be sufficient to cover operating expenses.
Step 4: Appointment of a Chief Representative
The parent company must appoint a Chief Representative to manage the office in Thailand. This person is responsible for operations, legal compliance, and communication with Thai authorities. The Chief Representative can be a foreigner or Thai national, and if foreign, must obtain a work permit and non-immigrant “B” visa.
Step 5: Register for tax and social security
Although an RO does not pay corporate income tax, it must:
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Obtain a Tax Identification Number (TIN) from the Revenue Department.
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Register for social security contributions if it employs staff.
Step 6: Maintain compliance
The Representative Office must file annual reports to the DBD detailing:
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Activities conducted during the year,
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Funds remitted from abroad, and
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Number of employees and expenses incurred.
6. Employment and Visa Regulations
Foreign employees of the Representative Office must hold:
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A Non-Immigrant “B” visa issued by a Thai Embassy or Consulate, and
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A work permit obtained through the Ministry of Labour.
Work permits are typically issued for one year and renewable annually. The office must employ a minimum of one Thai employee per foreign staff member to maintain legal compliance.
7. Taxation and Accounting
Although the Representative Office does not earn revenue, it must still maintain proper accounting records and submit annual financial statements to the DBD and Revenue Department. The RO may be subject to:
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Withholding tax on employee salaries,
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Value Added Tax (VAT) registration if it imports services, and
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Stamp duty on certain official documents.
Because its expenses are funded entirely from overseas, the RO’s remittances are treated as non-taxable income.
8. Duration and Termination
The Foreign Business License issued to a Representative Office is valid as long as the parent company maintains operations and complies with Thai laws. If the RO ceases activities, it must notify the DBD and Revenue Department, close bank accounts, and settle outstanding taxes or obligations before termination.
9. Transition to Other Business Forms
Once a foreign company decides to expand operations, the Representative Office can be converted into:
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A Branch Office (which may generate income, subject to corporate tax), or
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A Thai Limited Company (with at least 51% Thai ownership, unless promoted by the Board of Investment).
Conversion requires a separate application and compliance with the Foreign Business Act.
Conclusion
Establishing a Representative Office in Thailand offers foreign companies a secure and efficient entry point into the Thai market. It allows for valuable market research, quality control, and liaison functions without the risk or tax exposure of commercial operations. By adhering strictly to the permitted activities and licensing requirements under the Foreign Business Act, foreign investors can maintain compliance while building a strategic presence in Southeast Asia’s second-largest economy.
For companies considering long-term operations, a Representative Office serves as an excellent foundation for future expansion into a branch or subsidiary once the business environment proves favorable.