An In-Depth Guide to Representative Office in Indonesia

To simplify the investments for foreigners in Indonesia, the Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal “BKPM”) has just announced the implementation of two new groups of regulations on investments. One of the rules related to Regulation No. 13/2017 on The Guidelines and Procedure for Capital Investment Licensing and Facilities is the changes in the division of representative office in Indonesia.

Regulation 13/2017

The issuance of BKPM’s Regulation 13/2017 acts as an implementation of the 16th Economy Policy Package in Indonesia in regard to the Acceleration of Business Operations.

The changes aim to make investment facilities’ procedures and licenses in Indonesia simpler.

See the impact of simplification of regulation; check Ease of Doing Business in Indonesia for 2018.

Under the enacted regulation of 13/2017, BKPM approves the representative offices for construction, and representative offices for oil and gas, in addition to the existing two types of representative offices. Other key changes under Regulation 13 related to representative offices also include the removal of the limited 5-year validity license for regional representative offices.

Types of Representative Offices in Indonesia in 2018

Previously, the main types of Representative Office in Indonesia were:

1. 1. General Representative Office of a Foreign Company (KPPA)
   2. Representative Office of a Foreign Trading Company (KP3A)
   3. Representative Office of a Foreign Construction Service Company (BUJKA)
   4. Representative Office of a Foreign Bank and Finance

With the newly added member, the four types of Representative Office in Indonesia currently available are:

1. 1. General Representative Office of a Foreign Company (KPPA)
   2. Representative Office of a Foreign Trading Company (KP3A)
   3. Representative Office of a Foreign Construction Service Company (BUJKA)
   4. Representative Office of a Foreign Oil and Gas Company (KPPA MIGAS)

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 as compared to a trading representative office which is established for management purposes.

To set up a KPPA in Indonesia, you will have to submit an application to 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 located in provincial capital cities, in an office building.

KPPA license is valid for 3 years and extendable without limitations with 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.

KP3A

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

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

Both 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 higher educational background and experience in related fields to be eligible.

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. 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

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, it allows companies to do market research and liaise with other companies and institutions. It can also involve the procurement of construction services, and assign 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.

KPPA MIGAS

There are no exact restrictions of a KPPA MIGAS, however, it is of the general consensus that KPPA MIGAS is regulated in the same way as KPPA.

Foreign companies with their field in oil and gas can now establish a KPPA MIGAS in Indonesia. It was not regulated by BKPM previously and the permit is also 3 years which can be extended.

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 set up
• Establish the market presence in Indonesia very inexpensively
• Full compliance with law 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 domicile letter from 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 pay 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

Interested in opening a representative office in Indonesia? Fill in the form below to boost your market presence as the very first step to start your business in Indonesia!