If you’re a foreign company looking to expand your business into Indonesia, you’ll need to decide on the best legal structure for your presence in the country. Two of the most common options are representative offices and branches.
But, what’s the differences between branch office vs representative office? Check it in this article!
What is a Representative Office?
A representative office is a temporary business entity that is not a legal entity in its own right. It is typically used by foreign companies to conduct market research, promote their products or services, and build relationships with potential customers and partners. Representative offices cannot generate revenue or engage in any commercial activities.
Also read: What is a Representative Office: Definition and Advantage
What is a Branch?
A branch is a legal extension of a foreign company. It is a separate legal entity that is subject to the same laws and regulations as any other Indonesian company. Branches can generate revenue and engage in any commercial activities that are permitted by the Indonesian government.
The Difference between Representative Offices and Branches
The fundamental distinction lies in their operational scope and legal status. While a representative office focuses on non-commercial activities such as market research and promotion, a branch engages in commercial operations, including sales and revenue generation.
However, the benefit lies in the fact that establishing a representative office in Indonesia offers the swiftest and simplest means of creating a legitimate entity within the nation while ensuring zero plagiarism.
Also read: Set Up Representative Office in Indonesia: Complete Guide
The Opportunity of Representative Offices and Branches in Indonesia
Indonesia is a growing market with a large and young population. There are many opportunities for foreign companies to do business in Indonesia. Representative offices (also known as KPPA in Indonesia) and branches can both be effective ways to enter the Indonesian market.
Representative offices are a good option for foreign companies that are just starting out in Indonesia. They are a low-cost way to establish a presence in the country and to conduct market research. Representative offices can also be used to build relationships with potential customers and partners.(read more in Benefits of a Representative Office in Indonesia)
Branches are a good option for foreign companies that are already established in Indonesia and that want to expand their operations. Branches can generate revenue and engage in commercial activities, which can help foreign companies to grow their business in Indonesia.
Also read: Representative Office vs. Subsidiary: What’s the Difference?
Also read: The Types of Representative Offices in Indonesia
In summary, understanding the difference between a representative office and a branch is crucial for international business expansion. While representative offices focus on non-commercial activities and serve as a strategic entry point into foreign markets, branches have the autonomy to engage in profit-generating operations. By assessing your business objectives, market dynamics, and regulatory requirements, you can determine the most suitable approach for your global expansion strategy.
If you’re considering establishing a representative office or branch in Indonesia, InvestinAsia can help. InvestinAsia is a leading company registration service in Indonesia. We can help you with all the necessary paperwork and procedures to set up your business in Indonesia. InvestinAsia also offers a range of other services to help foreign companies succeed in Indonesia, such as accounting, tax, and legal services.
to learn more about how InvestinAsia can help you establish a representative office or branch in Indonesia.
