Steps to Set Up a Representative Office in Jakarta

Setting up a Representative Office (RO) in Jakarta can be a practical way for foreign companies to explore business opportunities and establish a presence without fully committing to establishing companies that generate income in Indonesia.

While a representative office has limitations on its activities, it can still serve as a valuable liaison between the parent company and potential clients or partners in Jakarta. 

This guide will explore the legal requirements and procedures for establishing a representative office in Jakarta for businesses to tap into the Indonesian market.

What is a Representative Office?

A Representative Office is international facility companies utilize to conduct market research. It is also viable for networking, business opportunity exploration, or other management support in metropolitan cities such as Jakarta. 

In addition, Representative Office allows foreign investors to assess the country’s potential for starting and sustaining a business. 

Given Jakarta’s large population, abundant natural resources, and low minimum wages, it is a profitable market for foreign investors. 

One or more individuals can manage the RO. Indonesian or foreign citizens are appointed as representative office executives based on a letter of appointment from a foreign company or a group of foreign companies.

Read more: How to Establish a Representative Office in Surabaya

The Benefits of Establishing a Representative Office in Jakarta

If you are contemplating expanding your business to Jakarta, it may be advantageous to establish a Representative Office. This approach can provide various benefits, which we will explore in the following points.

1. Cost-Effective Solution

A representative office in Jakarta is a cost-effective solution for foreign companies exploring business opportunities in Indonesia. It allows business entities to establish a presence in the country without setting up a legal entity.

2. Platform for Networking

A representative office in Jakarta provides a platform for foreign companies to build relationships with local partners and government agencies, which can benefit future business ventures.

3. Strategic Location

As Indonesia’s economic and political hub, Jakarta presents a prime opportunity for foreign companies seeking to grow their businesses there.

4. Large Consumer Market

With over 10 million people, Jakarta represents a significant consumer market for foreign companies looking to introduce their products or services to Indonesian consumers.

5. Abundant Natural Resources

Indonesia has abundant natural resources, and Jakarta serves as a gateway to other parts of the country that are rich in natural resources, such as Sumatra, Kalimantan, and Sulawesi.

Activities Allowed for Representative Office in Jakarta

An RO in Indonesia is only allowed to engage in non-commercial activities. It is possible to hire foreign nationals, but it is recommended to hire Indonesians. 

The permitted activities for a representative office in Indonesia include:

• Assisting the parent company as a coordinator, liaison, or supervisor.
• Planning for the establishment of a foreign investment firm in Indonesia.
• Refraining from managing the parent company’s branch office or subsidiary in Indonesia.
• Not seeking revenue from Indonesia. 

To set up a representative office, one must establish it in an office building in any Indonesian province’s capital city. 

Representative offices are considered low-risk business entities that require only a business identity number (NIB) and RO registration to start operating.

Legal Framework for Representative Offices in Jakarta

BKPM’s Regulation 13/2017 on Guidelines and Procedures for Implementing Capital Investment Licensing and Facilities is an execution of the 16th Economic Policy Package in Indonesia to expedite business operations.

The changes aim to simplify investment facility procedures and licenses in Indonesia. The new regulation, 13/2017, introduces the approval of ROs for construction, oil and gas, and the two existing types of ROs. 

Additionally, the valid license for regional ROs, limited to 5 years, has been removed under Regulation 13.

Read more: How can A Representative Office in Semarang be Beneficial for Your Business?

How to Set Up a Representative Office in Jakarta

There are four types of Representative Offices available in Indonesia: 

• 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 of a Foreign Oil and Gas Company (KPPA MIGAS)

The process of establishing different types of ROs in Indonesia involves several steps. 

For KPPA/KPPA MIGAS, it is necessary to obtain a letter of approval for the KPPA license from BKPM and a domicile letter from the local sub-district. 

An attorney must sign the application, and the company must register for a tax ID (NPWP) and company registration certificate (TDP).

For KP3A, the first step is to apply for a temporary KP3A license at BKPM, obtain a domicile letter, and have the application signed by an attorney. 

After obtaining a tax ID and company registration certificate, the company can apply for a permanent KP3A license.

Finally, to obtain a BUJKA license, the application must be reviewed and government tax paid. 

After obtaining the license, the company must receive a domicile letter and register for a tax ID, followed by obtaining the company registration certificate.

Important Considerations for Setting Up a Representative Office in Jakarta

Before setting up a representative office in Jakarta, it is essential to consider a few crucial factors. Below are some critical points to consider when setting up a representative office in Jakarta.

Company Setup

Choosing a legal entity is the initial step when establishing a business in Indonesia. For example, an RO differs from a Limited Liability Company (PT), Foreign-owned Limited Liability Company (PT PMA), and Public Companies. 

Once you have selected your legal entity, you need to determine whether you require physical office space in Indonesia or whether you can hire employees in Indonesia remotely through a virtual office. 

It’s crucial to comply with Indonesian law, including your company type, business category, and location.

Employment Regulations

If you need to hire employees in Indonesia, you must comply with all the employment regulations, which can differ from those in your home country. 

Understanding your responsibilities as an employer and your employees’ rights is crucial. In addition, familiarize yourself with local employment legislation to avoid legal issues and penalties. 

You must pay attention to wages, benefits, paid holidays, sick leaves, maternity leaves, healthcare, overtime pay, and other compensation. You should know their work permit requirements if you’re employing foreign workers.

Business Licenses

You’ll need specific business licenses to operate legally in Indonesia, which vary depending on your business type. The most common license is a general business license, which allows you to conduct general business activities and provide goods and services. 

If you’re in the manufacturing industry, you’ll need an industrial business license; if you’re in the construction business, you’ll need a construction business license. Additionally, you may need to apply for specific permits, depending on your business activities.

Conclusion

The use of representative offices (ROs) has become increasingly common, as they are considered essential extensions of a company that supports business expansion.

Foreign companies seeking to establish ROs can acquire assistance from InCorp Indonesia (formerly Cekindo) with business setup and company registration. This additional aid would help further boost the profitability of a business in the long run.