Forms of Business Organization — Foreign Companies

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Branch of a Foreign Company

A foreign company may establish a branch to conduct business in Thailand. However, there are several reasons why incorporating a Thai company may be a more preferable option than opening a branch:

  • Only a legal entity registered in Thailand can obtain privileges from the Board of Investment (BOI);
  • Certain business licenses or permits in Thailand can only be obtained by a Thai company;
  • Thai law restricts foreign companies from operating in certain sectors of commercial activity;
  • Tax advantages are granted specifically to Thai companies, including lower corporate income tax rates and tax benefits when repatriating profits abroad.

Representative Office of a Foreign Company

A foreign company may establish a representative office in Thailand to engage in non-commercial activities on behalf of the parent company. The rules governing the establishment of representative offices are set out in the Regulations of the Office of the Prime Minister (1986).

The activities of a representative office are limited to:

  • Sourcing local suppliers of goods and services for the head office;
  • Inspecting and controlling the quality and quantity of goods purchased by the head office;
  • Providing advisory services related to products sold by the head office to local distributors and consumers;
  • Disseminating information about new products and services of the head office;
  • Reporting on local business conditions and market developments to the head office.

A license must be obtained prior to the registration of a representative office. General rules apply, including minimum capital requirements.

Regarding corporate income tax: if the representative office provides services only to its head office and receives funds solely to cover operating expenses, such support is not subject to taxation. However, the office must maintain accounting records and submit annual financial statements, even if no profit is generated.

Regional Office of a Multinational Corporation

A multinational corporation may establish a regional office in Thailand to conduct non-commercial activities. The relevant regulations are defined in the Regulations of the Office of the Prime Minister (1992).

Permitted activities include:

  • Coordination, supervision, and control of affiliated companies in the region;
  • Providing services to subsidiaries, including:
    • advisory and management services;
    • training and staff development;
    • financial management;
    • marketing management and sales promotion;
    • research and development.

A regional office is not allowed to accept purchase orders, offer goods or services at discounted prices, or conduct business negotiations with individuals or entities in Thailand.

The head office bears all expenses of the regional office. Licenses must be obtained prior to registration, and general capital requirements apply.

For tax purposes: if the regional office provides services only to its head office and receives funds solely to cover expenses, such income is not taxable. However, it must maintain accounts and submit annual reports. If it provides services to third parties, it will be subject to standard corporate income tax.

Regional Operating Headquarters (ROH)

In 2002, the Thai government approved a package of tax incentives aimed at attracting foreign Regional Operating Headquarters (ROH) to Thailand. These incentives are a key part of the country’s strategy to attract foreign investment.

For tax purposes, an ROH is defined as a company incorporated under Thai law that provides the following services to its branches or affiliated companies in Thailand or abroad:

  • Management and administrative services;
  • Technical support;
  • Support services.

Support services include:

  • General management, business planning, and coordination;
  • Procurement of raw materials and components;
  • Research and development;
  • Technical support;
  • Marketing support and sales promotion;
  • Regional training and human resource management;
  • Financial consulting;
  • Investment analysis and feasibility studies;
  • Credit and treasury management;
  • Other activities as prescribed by the Director-General of the Thai Revenue Department.

Qualification Criteria

To qualify for tax incentives, an ROH must meet the following requirements:

  • Registered capital must be at least 10 million baht at the end of each accounting period;
  • Services must be provided to affiliated companies or branches in at least three countries outside Thailand;
  • Income from services and royalties received from abroad must account for at least 50% of total revenue (reduced to one-third during the first three accounting periods; exceptions may be granted);
  • The ROH must be registered and operate in accordance with regulations set by the Thai Revenue Department;
  • Ongoing compliance with these rules is required.

Additional Benefits

An ROH promoted by the Board of Investment may also receive additional privileges, such as:

  • Permission to own land;
  • Permission to employ foreign specialists;
  • 100% foreign ownership of company shares.
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