Opening a representative office (RO) is the fastest and simplest way of establishing a legal entity in Indonesia. This set up is a temporary arrangement as ROs are not allowed to engage in any commercial activities, issue invoices, sign contracts, or earn any revenue. Foreign investors, however, can own 100 percent of this business entity and do not have to contribute the same paid-up capital required by limited liability companies.
The business activities of ROs are limited to market research activities, obtaining information on potential clients, developing trade contacts, and gathering information on regulations and laws.
There are four types of ROs which we explore below.
1/ General representative office (KPPA) is a general RO, ideal for investors who are still exploring opportunities in Indonesia. The KPPA has two main responsibilities:
- Represent, supervise, and manage its parent company in Indonesia; and
- Prepare for the establishment of a limited liability company for the parent
The KPPA must be incorporated in the capital of any Indonesian province and must be located in an office building. The KPPA permit is valid for an initial three years and can be extended twice for one year each time.
2/ Representative office for a foreign trading company (KP3A) is similar to a KPPA but is more ideally suited for manufacturers or product owners looking to establish a network of distributors in the country. The KP3A is divided into the following categories:
- Can act as a buying/or selling agent for the parent company, performing liaising or promotional activities; or
- Act as a manufacturing agent with its activities also limited to market research and liaising.
Unlike a KPPA, the KP3A does not have to be established in the capital city of a province; they can set up in any district or regency in the country.
Foreign investors will also need to obtain a Foreign Company Trade Representative license (SIUP3A), which can be done through the OSS system of the Indonesian Investment Coordinating Board (BKPM). The KP3A permit is limited to two months (temporary license) to a maximum of one year (permanent license).
3/ Representative office for a foreign construction company (BUJKA) is an RO for foreign construction companies, and unlike the KPPA and KP3A entities, a BUJKA can undertake projects in Indonesia through a joint venture with a local construction company. The BUJKA license is valid for three years and the local partner must be a limited liability company.
Applicants must prove to the National Construction Services Development Board (LPJK) that they are classified as a ‘large’ construction company, and they must have a service business license issued by the Department of Public Works.
4/ Representative office for a foreign oil and gas company (KPPA MIGAS)
Foreign oil companies can set up a representative office through a KPPA MIGAS permit. The license is valid for three years and applicants will need to seek prior approval from the (BKPM).
General set up requirements for ROs
- Register with the BKPM through their OSS online portal;
- The parent company’s Article of Association legalized by a notary and the Indonesian Embassy of the parent company’s country of origin;
- Letter of Appointment by the Indonesian Embassy located in the parent company’s country of origin;
- Latest financial statements of the parent
- Letter of intent legalized by a notary and the Indonesian Embassy located in the parent company’s country of origin;
- The number and details of local workers to be hired;
- Certificates demonstrating competency in the relevant industry or sub-sector;
- Recommendation letter from the Ministry of Energy and Mineral Resources (for KPPA MIGAS applicants);
- Lease agreements;
- Must be located in the capital of a province (unless it is a KP3A applicant); and
- A letter that states the RO will not engage in any commercial activities in Indonesia.
Foreign investors looking to establish a presence in Indonesia may use the services of registered local advisors who can ensure their set up process application is accurate and complete.
This article was originally published on October 8, 2018, and was updated on December 30, 2019
Source from INDONESIA-BRIEFING
