Representative Office

A Representative Office is a popular choice for foreign companies wishing to explore the Thai market or liaise between the head office and their business interests in Thailand with a soft structure. One of the key benefits is the reduced ratio from 4 to 1 Thai employee per foreign employee to support a work permit compared to a traditional Thai limited company. Since June 2017, the registration timeline has been shortened to one week with the removal of the obligation to apply for a Foreign Business License.

Representative Office in Thailand at a glance

What is a Representative Office?

Representative Office in Thailand

Under Thai law, a Representative Office is an office established by a foreign company that is treated as the same entity of its parent company (this is not a separate entity from the head office unlike a limited company). As a consequence, the head office is liable for the action of the Representative Office in Thailand.

A representative office is a non-trading entity whose only purpose is to provide service to its parent company. A Representative Office is restricted to 5 business activities:

1. Sourcing of local goods or services in Thailand
2. Inspecting and controlling quality and volume of goods which the head office purchases in Thailand
3. Disseminating information about new products and services of the head office
4. Reporting to the head office on local business development and activities, and/or
5. Providing advice in various fields relating to goods distributed by the head office to the distributors or consumers

A Representative Office is not allowed to generate any income nor enter into commercial agreements (on its own account or on behalf of the parent company). It can only sign the necessary documents for its operation in Thailand. The expenses of the Representative Office must be fully financed by its parent company.

A minimum investment of 2 million Baht must be made within 3 years with minimum installments as follows:

• 25% within the first 3 months of registration;
• 25% within the first year;
• 25% within the second year; and
• 25% within the third year.

To hire a foreign employee, the 2 million Baht must be fully transferred into the Thai bank account of the Representative Office and one Thai employee is required to support the work permit. To hire a second foreigner, another 2 million Baht (a total of 4 million Baht) will have to be transferred.

What are the advantages of a Representative Office in Thailand?

Advantages of a Representative Office

The main advantages of setting up a Representative Office in Thailand is the possibility to support one work permit per foreign employee with only one Thai employee (the ratio for a limited company is 4 Thai employees per foreign employee except if the company has obtained a promotion from the Board of Investment). The maximum number of foreign employees is usually 2 (it is sometimes possible to obtain several more work permits depending on the activity of the Representative Office).

As the Representative Office cannot generate income in Thailand, it is not subject to corporate income tax. However, the employees are still subject to the personal income withholding tax on their salaries.

To cope with the inability of the Representative Office to enter into commercial agreements and generate income, it is a common practice for foreign companies to set up an invoicing company in Singapore or a limited company in Thailand with a local partner to support its business activities in Thailand. Our market entry expert will advise you on the best entry strategy.

How to obtain a work permit for a Representative Office?

Work Permit for a Representative Office

A distinction between the foreign director of the Representative Office and the other foreign employees of the Representative Office must be made following the abolition of the requirement to obtain a Foreign Business License that has created confusion between the Ministry of Commerce and the Labor Department.

Work Permit for the authorized director of a Representative Office

The foreign authorized director of a Representative Office must obtain a work permit unless the Representative Office holds a Foreign Business License. The process to obtain a Foreign Business License usually takes 4 to 6 months and requires a minimum investment of 3 million Baht, which is higher than the 2 million Baht required to obtain a work permit without a Foreign Business License. In practice, the authorized director of a Representative Office would need to comply with the requirement below to obtain a work permit.

Work Permit for the director and employees of a Representative Office

To support a work permit for a Representative Office in Thailand, there is a minimum of 2 million Baht and one Thai employee.

Representative Office vs Thai Limited Company

A Representative Office has the ratio of 1 Thai employee per foreign employee but its activities are limited and it cannot generate income while a Thai Limited Company with a local partner can carry out most business activities without any specific restrictions. The key differences are highlighted below: