An In-Depth Guide to Representative Office in Indonesia

Establishing a presence can be a strategic move for foreign companies eyeing the dynamic Indonesian market. Representative offices (ROs) have long been a popular entry point, offering a lighter footprint than full-fledged subsidiaries. However, the recent Government Regulation in Lieu of Law No. 2 of 2022 (GR 2/2022) has significantly reshaped the RO landscape, introducing four distinct types with varying functionalities and restrictions.

What are Representative Offices?

An RO acts as an extension of a foreign company in Indonesia, enabling activities like market research, liaison with local partners, and promoting the parent company’s brand. However, crucial limitations exist: ROs cannot directly engage in commercial activities, generate revenue, or sign contracts.

Types of Representative Offices in Indonesia

The new regulation has introduced four types of representative offices (ROs), each with specific permitted activities and limitations. These are: 

• General Representative Office of a Foreign Company (KPPA)
• Representative Office of a Foreign Trading Company (KP3A)
• Representative Office of a Foreign Construction Service Company (BUJKA)
• Representative office for a foreign electricity company (JPTLA).

Furthermore, the law has simplified the establishment of an RO in Indonesia. However, it’s important to note that the business activities of ROs in Indonesia are limited to market research activities, obtaining information on potential clients, developing trade contacts, and gathering information on regulations and laws.

KPPA

KPPA is usually established to have a market presence without large capital investments before starting a business in Indonesia with a PT PMA. It is a general representative office compared to a trading representative office established for management purposes.

To set up a KPPA in Indonesia, you will have to apply the BKPM via the director or manager of the foreign company or director in Indonesia appointed on behalf of the company.

You can also get a lawyer for this purpose, as the process might get a bit more complicated. A KPPA must be in an office building in a provincial capital city.

The KPPA license is valid for 3 years and is extendable without limitations within the validity period specified in the appointment letter. You can only extend this license for a maximum of two years before Regulation 13/2017 took effect.

A KPPA serves to:

1. Supervise, liaise, manage, coordinate, and represent its affiliates or parent company abroad.
2. Get ready to establish and develop a foreign-owned company in Indonesia.

A KPPA is not allowed to:

1. Be a member of company management, branch, or subsidiary in Indonesia.
2. Generate any revenue through sales or purchase transactions and other sources in Indonesia.

Foreign Trade Company Representative Office (KP3A)

Three types of KP3A are selling agents, manufacturing agents, and buying agents. The selling agent is to perform liaising and promotional activities; the manufacturing agent is to perform the market survey, and the buying agent is to supervise and liaise.

If you set up a KP3A in Indonesia, it does not permit trading activities or sales activities.

KPPA and KP3A do not give you the benefits to do business for revenue purposes in Indonesia. However, you can open a branch office in any part of Indonesia, which a KPPA is not able to do.

To manage a KP3A, you need to be an individual with a higher educational background and experience in related fields to be eligible.

Foreign Trade Company Representative (KP3A) serves to promote products in Indonesia for its mother company overseas.

The application process is the same as for KPPA, only that submitted documents need to be notarized in the country of origin, and then legalized by the Indonesian Ministry of Foreign Affairs.

The office must be in provincial capital cities or other districts/cities within Indonesia.

Applying for KP3A  requires a SIUP3A license. There are several different kinds based on the function of your representative office.

1. Temporary SIUP3A – valid for 2 months from the date of issuance
2. Head Office SIUP3A – valid for 1 year from the date of issuance
3. Branch Office SIUP3A & SIUP3A extension – valid up to 3 years from the date of issuance unless stated otherwise in the letter of appointment

Representative Office for A Foreign Construction Company (BUJKA)

If you are a construction company with a B or B2 business qualification, you can register for a BUJKA. B qualification stands for planning (Perencana) and B2 for implementer (Pelaksana) activity.

Unlike KP3A and KPPA, you are able to execute projects in Indonesia with BUJKA with a local construction organization (BUJK) (100% owned by an Indonesian) via a joint operation.

The permit is valid for 3 years and is extendable as well. BUJKA’s license application, replacement, and renewal fees fall between US$5,000 and US$10,000. Fees vary based on the active business field that the BUJKA participates in.

With BUJKA, companies can do market research and liaise with other companies and institutions. It can also involve the procurement of construction services and assigning Indonesian or foreign manpower to manage the office.

You must submit the application and documents to the Ministry of Public Works. The administrative fees are US$5,000 and US$10,000 for construction consultancy services and construction implementation services, respectively.

BUJKA license application requires more paperwork than other representative offices, and you must prove your company has a good reputation with a considerably larger operation.

Representative Office for Foreign Electricity Supporting Services (JPTLA)

A foreign company specializing in electricity supporting services (EESS), may consider establishing a JPTLA – a dedicated representative office in Indonesia. This avenue will allow you to explore market opportunities and build relationships with local partners, potentially paving the way for further operations. JPTLA can engage in three key activities:

• Construction: Build and install electricity infrastructure for major projects exceeding 100 billion rupiah (approximately US$6.9 million).
• Consultation: Provide expert advice on electrical maintenance and installation for projects exceeding 10 billion rupiah (approximately US$696,000).
• Maintenance: Ensure the smooth operation of electrical systems.

Representative Offices in Indonesia in a Nutshell

Advantages

• 100% foreign ownership is allowed
• Minimum expenses, no investment required
• Shareholders and directors are not necessary
• Fast incorporation and setup
• Establish a market presence in Indonesia very inexpensively
• Full compliance with laws and regulations in Indonesia
• Able to apply limited stay permits (KITAS) for its foreign executives

Disadvantages

• Restricted sales and business activities
• Limited supervisory or marketing activities
• Foreign worker sponsor is limited (for each expat to work at your representative office in Indonesia, you will need three local Indonesian employees)

Procedure of Application

Here’s a brief guideline of the steps you need to take to establish different representative offices in Indonesia:

KPPA/KPPA MIGAS

1. Request letter of approval from BKPM  for KPPA license
2. Receive a domicile letter from the local sub-district
3. Attorney to sign the application
4. Tax ID registration(NPWP)
5. The company registry (TDP)

KP3A

1. Apply for KP3A temporary license at BKPM
2. Obtain a domicile letter from the local sub-district
3. Attorney to sign the application
4. Tax ID registration(NPWP)
5. The company registry (TDP)
6. Obtain KP3A permanent license

BUJKA

1. Application reviewed and paid for government tax
2. Obtain BUJKA license
3. Receive a domicile letter from the local sub-district
4. Tax ID registration
5. Attain company registration certificate

Take the First Step for Doing Business with InCorp Indonesia

Ready to tap into the vibrant Indonesian market with your own representative office? Don’t miss out on this golden opportunity – let InCorp Indonesia be your trusted partner to navigate the process seamlessly. Fill out the form below today.