Representative Office in Thailand

Establishing a Representative Office in Thailand is one of the most attractive options for foreign companies seeking to explore business opportunities in the Thai market without engaging in direct commercial activities. With its strategic location in Southeast Asia, developed infrastructure, and strong economic growth, Thailand is a regional hub for trade, investment, and corporate expansion. A Representative Office offers foreign companies a low-risk, low-tax means to establish a local presence while gathering market information, supporting affiliated entities, and coordinating regional operations. Understanding the purpose, regulatory framework, establishment process, and benefits of a Representative Office is essential for investors planning a long-term business strategy in Thailand.

1. What Is a Representative Office in Thailand?

A Representative Office is a legal entity established by a foreign parent company to perform non-revenue-generating activities in Thailand. Unlike private limited companies or branch offices, a Representative Office cannot engage in profit-making business, issue invoices, or sign service agreements for commercial gain. Instead, it serves as an extension of the foreign headquarters, conducting specific support functions that help the parent company evaluate the Thai market or coordinate regional activities.

Because a Representative Office does not earn income, it is not subject to corporate income tax, except for certain payments such as interest income or income received from outside Thailand. Its primary role is to facilitate communication, provide information, and oversee business operations on behalf of the foreign head office.

2. Permitted Activities of a Representative Office

Thai law strictly regulates what a Representative Office may and may not do. To qualify as a Representative Office, the entity must limit itself to five allowed activities:

1. Sourcing products or services in Thailand for the parent company.
   This includes finding suppliers, evaluating materials, and coordinating procurement activities.

2. Checking and controlling the quality and quantity of goods purchased in Thailand.

3. Providing advice or assistance relating to goods sold by the parent company to Thai distributors or clients.

4. Disseminating information about new products or services offered by the parent company.
   This often involves market research, product education, or information sharing.

5. Reporting on business trends, market movements, and commercial activity in Thailand to the headquarters.

These activities are strictly non-commercial. A Representative Office cannot sell goods, enter into commercial contracts, lease out services, or earn profit in Thailand.

3. Why Set Up a Representative Office in Thailand?

There are several strategic advantages to establishing a Representative Office, particularly for companies that are still evaluating the Thai market or coordinating regional operations.

a. Zero Corporate Income Tax on Local Operations

A Representative Office does not generate income in Thailand, and therefore it is exempt from corporate income tax on its general activities. This makes it a cost-efficient option for foreign investors conducting preliminary market research or sourcing activities.

b. Full Foreign Ownership Allowed

Unlike a Thai Limited Company, which may require Thai majority ownership depending on business activities, a Representative Office may be 100% foreign-owned. This offers full control for the foreign company without the complexities of structuring shareholding to comply with the Foreign Business Act.

c. No Paid-Up Capital Requirement Like Commercial Companies

Although the government requires minimum capital of 2 million THB, this can be injected in installments over the first three years. This is significantly less burdensome than capital requirements for certain foreign-majority companies under the Foreign Business Act.

d. Ability to Employ Foreign Staff

A Representative Office may hire foreign employees and sponsor work permits, provided it meets immigration and employment requirements, such as maintaining the necessary capital injection and employing Thai staff.

e. Ideal for Market Entry and Risk Reduction

For companies unsure about long-term commercial investment, a Representative Office enables them to:

• Study the Thai market

• Coordinate supply chains

• Support distributors and partners

• Plan future expansion

This “soft landing” approach reduces financial and regulatory risks while maintaining a physical presence.

4. Requirements for Establishing a Representative Office

To set up a Representative Office, the foreign parent company must meet certain eligibility and documentary requirements.

a. Qualifications of the Parent Company

The parent company must:

• Be a legally registered foreign entity

• Have a stable financial background

• Engage only in the permitted activities

• Commit to funding the office’s operational costs

It must also prove that the office will not generate revenue in Thailand.

b. Minimum Capital Requirement

The minimum capital requirement is 2 million THB, divided as follows:

• 25% injected upon registration

• 25% injected by the end of the first year

• The remaining 50% injected over the next two years

This capital is used to fund the Representative Office’s operations.

c. Required Documents

Key documents typically include:

• Parent company’s corporate documents (Certificate of Incorporation, Memorandum, Articles)

• Letter of appointment for the local manager

• Power of Attorney

• Business plan

• Office lease or proof of business address

• Financial statements of the parent company

All foreign documents must be notarized and legalized.

5. Step-by-Step Process to Set Up a Representative Office

Establishing a Representative Office in Thailand generally involves the following steps:

Step 1: Prepare Required Documentation

The parent company gathers all corporate documents and appoints a local manager. These documents undergo notarization and legalization.

Step 2: File the Application with the Department of Business Development (DBD)

An application is submitted under the Foreign Business Act for a Representative Office license. The DBD will review whether the proposed activities fall within the permitted scope.

Step 3: Receive Approval and Register the Office

Once the license is approved, the Representative Office is formally registered. The local manager is then authorized to operate on behalf of the parent company.

Step 4: Inject Required Capital

The initial 25% of the capital must be remitted into Thailand through a recognized banking channel.

Step 5: Register for Tax Identification Number and Withholding Tax

Even though the Representative Office does not pay corporate income tax, it must:

• Apply for a Tax ID

• Withhold tax on salaries and certain vendor payments

Step 6: Apply for Work Permits (If Needed)

Foreign employees may receive work permits once the company satisfies capital and staffing requirements.

6. Limitations of a Representative Office

While a Representative Office is ideal for preliminary operations, it also has notable restrictions:

• Cannot generate revenue

• Cannot sign commercial contracts

• Cannot import goods for sale

• Cannot provide services to Thai clients

• Must operate solely on funding from the parent company

Companies expecting to engage in commercial activities should consider a Thai Limited Company or a Branch Office instead.

7. Conclusion

Setting up a Representative Office in Thailand is an excellent strategy for foreign companies seeking to explore business opportunities while minimizing risk and regulatory burden. With full foreign ownership, low capital requirements, tax advantages, and the ability to perform market research and coordination activities, a Representative Office serves as an efficient bridge between the parent company and the dynamic Thai market.

For businesses planning long-term expansion, it is also a practical first step before transitioning into a full commercial entity such as a Thai Limited Company or a Branch Office. Understanding the requirements, benefits, and limitations will help foreign investors make informed decisions and establish a strong foundation for future growth in Thailand.