General Representative Offices called ‘KPPA’ (Kantor Perwakilan Perusahaan Asing) provide foreign companies with the opportunity to enter the Indonesian market to explore commercial opportunities, engage in market surveillance, networking and promotion but not to directly engage in commercial activities such as invoicing. Representative offices for trading purposes or Foreign Trade Representative Offices are called ‘K3PA’ and are a separate category subject to different requirements. The KPPA representative office is ideal for investors looking to assess the potential of the Indonesian market prior to investing in the establishment of a local company called a ‘PMA’ or for companies looking to market their products and provide local representation on behalf of their head office.

General representative offices can be within any industry sector and are not subject to the restrictions of the Negative Investment List. Representative offices are also not subject to any minimum capital requirements and generally are faster to establish with the process taking around 6 weeks to complete. A work permit for foreign nationals called a ‘KITAS’ can be issued by representative offices for the Representative Office Executive while business visas for limited stays can also be sponsored without limitations. Further KITAS sponsorships are restricted by a ratio of one foreign national to every three Indonesian employees. A representative office allows a company to still provide its products or services in the local market.

The disadvantages of representative offices in Indonesia is that companies are strictly prohibited from engaging in commercial transactions which can only be carried out by the head office but are still required to provide regular monthly fiscal reporting. KPPAs can also only be located in the capital of a province within an office building and cannot apply for an import license unlike K3PA. Representative office licenses are granted for 3 years initially and can be extended twice up to 5 years in total but cannot be extended after that time period.

Representative offices are subject to a more simplified process than PMA establishment and require the following to be prepared:

• A Letter of Appointment from the parent company.
• Power of Attorney to sign the application if being represented by another party.
• Articles of Association of the parent company and any amendment(s) in English.
• Copy of a valid passport (for foreign nationals) or copy of identification card number (for Indonesian nationals) who will be proposed as a Representative Office Executive.
• Letter of Intent concerning the commitment to stay, and only work in the position as a Representative Office Executive without conducting other business in Indonesia.

 

Other categories of representative office include:

Foreign Trade Representative Office ‘K3PA’ – A K3PA can serve as local representative as an agent for sales, purchasing and on behalf of manufacturers, but are restricted in that they cannot engage in end to end commercial transactions. The K3PA can market and promote the goods of the parent company and supervise sales and contract conclusions by appointed companies. A Foreign Representative Office Trade Business License called ‘SIUP3A’ (Surat Izin Usaha Perwakilan Perdagangan Asing) is required for a Foreign Trade Representative Office to conduct its activities.

Foreign Construction Representative Office ‘BUJK’ – A BUJK serves as a local representative for foreign domiciled construction firms and is applicable to large scale foreign construction firms only as they may only engage in large scale, highly technical projects. In order to operate as a local representative for a construction firm, the BUJK must obtain a License of Representative Office for Foreign Construction Services called an ‘IUJK’ (Izin Perwakilan Badan Usaha Jasa Konstruksi).

If you are interested in setting up a representative office in Indonesia or to learn more, please contact GBG Indonesia.

Global Business Guide Indonesia - 2015

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)

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