Setting up representative office in Indonesia is a brilliant way to investigate the market before jumping into a complete and thorough business operation. Many foreign investors have put their interest in Indonesia because of its large population, low labor wages, and rich source of materials.
Representative offices allow foreign investors to learn about market opportunities and the right location to establish a business without needing a physical office. There are, of course, many other advantages of the Foreign Representative Office (FRO).
Besides the low incorporation cost, FRO is a hundred percent owned by the main company, and foreign investors are entitled to the residence and work permits. So, how to set up representative office in Indonesia? Read on for a complete guide.
Also read: What is a Representative Office: Definition and Advantages
Regulation of Representative Office in Indonesia
Kantor Perwakilan Perusahaan Asing (KPPA) or General Representative Office is regulated under the Indonesian Investment Coordinating Board (BKPM) Regulation No. 5 of 2019 jo. BKPM Regulation No. 6 of 2018 on Guide and Procedures on Investment Licensing and Facilities.
To set up representative office in Indonesia, foreign investors can register at the Risk-Based Business Licensing, Online Single Submission (OSS) system. This system’s implementation is regulated under Law Number 6 of 2023 concerning the Stipulation of Government Regulations in Lieu of Law Number 2 of 2022 concerning Job Creation into Law.
So, what are the documents that must be prepared? Here are the list:
- Article of Association
- Letter of Appointment agreed upon by the Indonesian Embassy and legalized by a notary.
- Letter of Intent from the parent company, agreed by the Indonesian Embassy and legalized by a notary.
- Letter of Statement mentioning a Representative Office Executive is willing to stay and work only for their position in FRO without any other business activities in Indonesia.
- Letter of Reference
- Copy of the foreigner’s passport, appointed as Representative Office Executive. Or identification card number if the Representative Office Executive is Indonesian.
Also read: The Types of Companies in Indonesia: 2024 Complete Guide
Types of Representative Offices in Indonesia
Indonesia’s Government Regulation in Lieu of Law No. 2 of 2022 has brought about amendments to Representative Offices (ROs) and introduced four distinct types of Representative Offices in Indonesia:
- Foreign Representative Office (FRO) or Kantor Perwakilan Perusahaan Asing (KPPA)
- Representative Office for a Foreign Trading Company (TRO) or Kantor Perwakilan Perusahaan Perdagangan Asing (KP3A)
- Representative Office for a Foreign Construction Company (BUJKA)
- Representative Office for a Foreign Electricity Company (JPTLA)
- Representative Office of Foreign Trading Companies in the Electronic Systems sector (KP3A PMSE)
Moreover, the regulation has streamlined the process for establishing a Representative Office in Indonesia.
The operational scope of ROs is restricted to specific business activities such as market research, gathering information on potential clients, developing trade contacts, and collecting data on regulations and laws.
Kantor Perwakilan Perusahaan Asing (KPPA) or Foreign Representative Office (FRO)
FRO is a great way for parent company learning business opportunities in Indonesia. However, FRO is not allowed to conduct commercial activities or make a profit. As for employment, FRO may hire foreigners or Indonesian. If foreign employees are employed, a FRO must also employ Indonesian.
Kantor Perwakilan Perusahaan Perdagangan Asing (KP3A) or Representative Office for a Foreign Trading Company (TRO)
A TRO serves as a trading or manufacturing agent for the parent company abroad but is not allowed to run any sales or trade business. When setting up a representative office in Indonesia, Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing Bidang Perdagangan Melalui Sistem Elektronik (SIUP3A Bidang PMSE) or TRO Business License for the Trade Sector is necessary.
Suppose a TRO wishes to perform import activities. In that case, the activities must be conducted through a local company with a business license or a foreign investment company with a general import identification number.
Also read: Difference Between Offshore and Onshore Companies
Badan Usaha Jasa Konstruksi Asing (BUJKA) or Representative Office for a foreign construction company
BUJK is a representative office for a construction business. Unlike KPPA and KP3A, BUJK can handle projects in Indonesia by collaborating with a local construction company. BUJK must earn Sertifikat Badan Usaha (SBU), a Business Entity Certificate, and Nomor Induk Berusaha (NIB), or Single Business Number.
Jasa Penunjang Tenaga Listrik Asing (JPTLA) or Representative Office for a foreign electricity company
A JPTLA is a FRO that engages in electricity-supporting services. JPTLA’s business activities include electricity installation consultation, construction, and maintenance. JPTLA may manage high-priced electricity assisting services if the projects are worth at least 100 billion rupiahs (US$6.9 million) or 10 billion rupiahs (US$696,000) if the projects are related to electrical maintenance and installation.
Also read: Benefits of Setting up a Representative Office in Indonesia
Representative Office Registration Process in Indonesia
Below are the steps for registering a representative office in Indonesia:
Prepare the required legal documents
The documents include the Article of Association (ACRA), Letter of Appointment, Letter of Intent, Business License, Letter of Statement, Letter of Reference, and copy passport of the directors.
Pick the Representative Office Executive
The Chief of Representative Office can be a foreigner or an Indonesian worker. If the chief is a foreigner, they must possess a work permit.
Also read: The Limitations of Representative Office in Indonesia
Register at the Investment Coordinating Board
After the above requirements are complete, the legal documents should be given to the Investment Coordinating Board.
Tax Registration
FRO should register for Nomor Pokok Wajib Pajak (NPWP) or a Tax Payer Registration Number from the Tax Office.
Earn Business Registration Number
Later on, FRO must obtain a Business Identification Number from the Online Single Submission (OSS).
Opening Bank Account
Next, FRO shall open a company bank account to pay all the expenses, including employees’ salaries and rent.
Also read: What is Company Incorporation: Definition and Advantages
You may also check:
- Representative Office vs Branch: What’s the Difference?
- Representative Office vs. Subsidiary: What’s the Difference?
Setting Up a Representative Office in Indonesia With InvestInAsia
For some investors, establishing a representative office could be pretty complicated. Therefore, a consultant or service provider will help you with all the procedures and requirements. With InvestInAsia, it only takes approximately two weeks to get it done.
Offering high standards and responsiveness, InvestInAsia will help your business step foot in Indonesia. Thousands of companies have trusted us.
So, does your company ready to expand its business in Indonesia? Chat us now and get FREE consultation!
