REPRESENTATIVE OFFICE

Opening a representative office is the fastest and also the easiest way of getting a legal and market presence in Indonesia. Despite having more limitations compared to limited liability companies, it also has its advantages.

A representative office is an office set up by a company located outside of Indonesia (parent company) to take care of its business in Indonesia. The main prerequisite for opening a representative office in Indonesia is that you must already have an existing legal entity abroad.

A representative office may act as a supervisor, liaison, coordinator, and also as a representative of the parent company’s interests in Indonesia. However, as representative offices are not allowed to generate any income in Indonesia, all commercial transactions must be handled by the parent company.

Also, note that a representative office is not the same as a branch. Currently, Indonesia does not allow foreign companies to open branch offices in Indonesia. If you are looking to establish a local entity that can earn revenue, own land and property, or import products to Indonesia, you need to set up a foreign direct investment company (PT PMA).

In Indonesia, there are four types of representative offices:

1. KPPA – a general representative office
2. KP3A – representative office for trading
3. BUJKA – representative office for foreign construction companies
4. KPPA Migas – representative office for foreign oil and gas companies

The activities of a general representative office are limited to taking care of the interests of the parent company and companies affiliated with the parent company.

Since representative offices cannot earn any revenue in Indonesia, they are not allowed to issue any invoices either.

The office of a KPPA must be located in a commercial high-rise building in the capital of an Indonesian Province. KPPA’s license is valid for up to 5 years and can be extended as per the Letter of Appointment.

A general representative office is a suitable option if you would like to conduct feasibility studies in Indonesia to test the market and later set up a PT PMA.

A representative office for trading may become the parent company’s selling, manufacturing, and buying agent in Indonesia. It can also handle the establishment of the parent company’s branch offices in any of the Indonesian cities.

However, as also for other types of representative offices, a KP3A is not allowed to issue any invoices and all transactions must be under the parent company’s name.

A KP3A can be located in the capitals of either a province or a regency/city all over Indonesia. The temporary license of a KP3A is valid for 2 months, a permanent license for 1 year. It is also possible to later extend the license and the extended license will be valid as per the Letter of Appointment.

A KP3A is a suitable option if the parent company is a manufacturer or a product owner with a plan to establish a network of agents and distributors in Indonesia.

A BUJKA is a representative office for foreign construction service companies. Through a BUJKA, you can:

• contact people, companies, and government institutions and also collect information regarding available construction projects all over Indonesia
• participate in tenders
• hire foreign experts and Indonesian staff to support your operation
• open a bank account in Indonesia

In other words, you can bypass a long and costly bureaucratic process by establishing a BUJKA instead of opening a construction company in Indonesia.
To deliver construction services, however, a BUJKA needs to set up a joint venture with a local construction service company (BUJK). A BUJK must be a limited liability company (PT) and must have 100% Indonesian citizens and companies as its shareholders.

Other prerequisites for BUJKAs are:

• must be classified as a “large” construction service company by the National Construction Services Development Board (LPJK)
• must have a construction service business license (IUJK) issued by the Department of Public Works.

The location of the office of a BUJKA, however, is not specified by the law. BUJKA license is valid for 3 years and is extendable. Suitable for foreign construction companies who are planning to expand their activities to Indonesia.

Foreign oil and gas companies are also allowed to establish a representative office and use it for having a permanent establishment in Indonesia under the subsector of oil and gas.

However, take note that in order to establish a KPPA Migas, you need a recommendation letter from the Ministry of Oil and Gas prior to submitting the application to the BKPM.

The KPPA Migas license is valid for 3 years and can be extended afterward. The location of the office is not specifically regulated by the law.

For your convenience, we have made an approximate calculation of opening a base Representative office in Indonesia. Please download our current quotation below.

Do not hesitate to contact us for consultations regarding all the peculiarities of the Indonesia-based investing campaign establishment. We will be pleased to assist you in your business endeavors.