A Representative Office in Thailand is a type of business structure that allows foreign companies to establish a presence in the country without engaging in revenue-generating activities. It serves as a liaison between the head office and Thai entities or customers, performing non-commercial functions such as market research, product sourcing, or quality control. Setting up a Representative Office is ideal for foreign companies that want to explore business opportunities or manage operations in Thailand without committing to a full-scale business investment.

This article provides a comprehensive guide to the purpose, benefits, limitations, and step-by-step process for establishing a Representative Office in Thailand.

Permitted Activities of a Representative Office

Under Thai regulations, a Representative Office may conduct only five types of activities, as prescribed by the Ministry of Commerce:

1. Sourcing goods or services in Thailand for the head office.
2. Inspecting and controlling the quality and quantity of goods purchased or produced in Thailand for export.
3. Providing advice related to goods sold by the head office to distributors or customers in Thailand.
4. Disseminating information about new products or services of the head office.
5. Reporting business movements in Thailand to the head office.

These activities are strictly non-commercial. The RO cannot generate income, issue invoices, trade goods or services, or engage in direct business negotiations for profit.

Benefits of Establishing a Representative Office in Thailand

Setting up a Representative Office offers several strategic advantages:

• Low-risk market entry: It allows foreign companies to study the Thai market before making significant investments.
• No corporate income tax: Since the RO does not earn revenue, it is exempt from income tax (except on income paid to employees).
• Simplified operations: There are fewer compliance obligations compared to a full foreign-owned company.
• Enhanced brand presence: It helps build local awareness and manage relationships with Thai clients or suppliers.

However, since an RO cannot earn income or enter into contracts, its use is suitable mainly for research, coordination, and support functions.

Requirements to Establish a Representative Office

Foreign companies seeking to establish a Representative Office must meet the following conditions:

• The parent company must be a juridical person established under foreign laws.
• The office must engage only in permitted non-commercial activities.
• The minimum capital requirement is THB 2 million (approximately USD 55,000), which must be remitted in stages.
• There must be at least one appointed representative residing in Thailand to manage the office.

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

1. Prepare Required Documentation

The parent company must gather the following documents:

• Affidavit or Certificate of Incorporation of the parent company
• Financial statements of the parent company for the past 3 years
• Power of attorney appointing the Representative Office’s manager
• Passport copy of the appointed manager (if foreign)
• Office lease agreement in Thailand
• Description of the intended activities in Thailand

All foreign documents must be notarized and legalized by the Royal Thai Embassy or Consulate in the country of origin.

2. Apply for Registration with the Department of Business Development (DBD)

As of 2023, the process of setting up a Representative Office is overseen by the Department of Business Development (DBD) under the Ministry of Commerce. The application includes:

• Form for business registration
• Description of business activities
• Manager’s details and responsibilities
• Proof of office location in Thailand
• Evidence of capital transfer plan (THB 2 million within 3 years)

Registration normally takes 7 to 15 business days, assuming all documentation is in order.

3. Remit the Required Capital

The parent company must remit a total of THB 2 million in stages:

• At least 25% within the first 3 months of operation
• Another 25% within the first year
• The remaining amount within the following two years

The capital must be transferred from overseas to the RO’s bank account in Thailand and is used for operational expenses like rent, salaries, and administrative costs.

4. Register for Tax Identification and Social Security

Even though an RO does not generate income, it must register with:

• The Revenue Department to obtain a tax ID number within 60 days
• The Social Security Office within 30 days of hiring employees

The office is responsible for withholding and submitting tax on employee salaries and contributing to the social security fund.

5. Obtain Work Permits for Foreign Employees

The RO can sponsor work permits for foreign managers and employees. The number of work permits allowed is generally linked to the size of the office and capital invested.

Usually, one work permit is allowed for every THB 3 million of capital, although exceptions may apply for managerial positions.

Ongoing Compliance Requirements

While Representative Offices are simpler to manage than full companies, they still have compliance obligations, including:

• Annual financial statement filings (even without income)
• Employee tax withholding and social security contributions
• Annual audits by licensed Thai auditors
• Office lease renewals and staff immigration management

Key Limitations of a Representative Office

Before deciding on this structure, it is important to consider the limitations:

• Cannot generate income or issue invoices
• Cannot sign commercial contracts on behalf of the parent company
• Cannot trade goods or services within Thailand
• Limited use of business licenses (e.g., import/export license not available)
• Funding must come entirely from the parent company

If you plan to actively do business or earn profits in Thailand, a Thai Limited Company or a BOI-promoted company may be more appropriate.

Conclusion

Establishing a Representative Office in Thailand is a strategic option for foreign companies seeking to explore the market, coordinate with Thai partners, or manage quality control without directly engaging in trade or generating revenue. It offers a low-risk, tax-efficient structure for limited operations, though it comes with restrictions on commercial activity.

With the right legal and administrative guidance, setting up a Representative Office can be a straightforward and effective way to establish a foreign corporate presence in Thailand. As always, it is advisable to consult with local legal professionals or corporate service providers to ensure full compliance with Thai regulations and to determine the best structure for your business objectives.