Foreign businesses looking to expand their operations in Indonesia often begin with a Representative Office (KPPA). However, when the time comes to engage in commercial activities, they must establish a PT PMA (Perseroan Terbatas Penanaman Modal Asing). This article explains the entire process of transitioning from a Representative Office to a fully functional PT PMA, step-by-step.
Also read: Representative Office vs. PT PMA in Indonesia: Key Differences for Foreign Investors
Why You Can’t Just “Convert” a Representative Office
The Representative Office and PT PMA operate under entirely different legal frameworks. A KPPA is a non-commercial entity, meaning it is not permitted to enter into contracts, generate income, or issue invoices. It exists solely for liaison purposes: conducting market research, promotion, and coordination.
In contrast, a PT PMA is a foreign-owned limited liability company. It allows foreign investors to generate revenue, hire staff, sign contracts, and run full business operations in Indonesia.
Because of these structural differences, a KPPA cannot be converted directly into a PT PMA. The transition involves closing the KPPA and registering a PT PMA as a completely new legal entity.
Step-by-Step Transition Process
Step 1: Close the Representative Office
You must notify the Indonesian Investment Coordinating Board (BKPM) and submit the necessary documents:
- Formal letter of closure
- Parent company’s board resolution
- Tax clearance certificate
- Latest financial statements
Other obligations include:
- Settling staff severance
- Canceling lease agreements
- Closing bank accounts
- Clearing vendor and supplier payments
Step 2: Register a New PT PMA
Establishing a PT PMA involves several regulatory steps:
Key Requirements:
- Minimum investment: IDR 10 billion (USD ~700,000), excluding land/building
- Paid-up capital: IDR 2.5 billion (USD ~185,000)
- Directors: At least one director must reside in Indonesia and obtain a KITAS and NPWP
- Shareholders: Minimum of two; one must be a foreign individual or entity
Also read: The Minimum Capital for Establishing PMA Company in Indonesia
Required Licenses:
| Document/License | Estimated Timeline |
|---|---|
| Deed of Establishment | 1–2 days |
| Legal Entity Approval (Ministry of Law) | 10 days |
| BKPM Business Licenses | 7 days |
| Domicile Letter | 3 days |
| Tax Number (NPWP) & PKP | 3 days |
| Company Registration Certificate | 14 days |
| Manpower Report | 7 days |
Be sure to consult about the Positive Investment List (Daftar Positif Investasi) to ensure your intended business activity is open to foreign ownership.
Also read: How to Set Up PMA Company in Indonesia: Guide for Foreigner
Common Challenges During the Transition
Compliance Gap
The transition creates a legal and operational gap. Since the KPPA must be closed before the PT PMA becomes fully active, companies should maintain client relationships and operational data during this downtime.
Capital and Financial Planning
With significant capital requirements and regulatory costs, businesses must prepare funding strategies in advance—especially for sectors like manufacturing that have even higher thresholds (IDR 15 billion+).
Regulatory Complexity
Indonesia’s investment rules span multiple ministries and require inter-agency coordination. Most companies choose to hire local experts to navigate this landscape smoothly.
How InvestinAsia Helps Ease the Transition
InvestinAsia provides two integrated services that simplify this complex shift:
- Indonesia Representative Office Setup: For businesses exploring the market and building local presence legally without full operations.
- Indonesia PT PMA / Foreign Company Registration Service: Expert support in company establishment, document preparation, licensing, capital structuring, and full compliance.
With deep knowledge of BKPM regulations and proven experience supporting foreign investors, InvestinAsia ensures you move from market exploration to full operation efficiently and legally.
Chat with us now for FREE consultation and get a special offer!
Moving from a Representative Office to a PT PMA in Indonesia marks the shift from exploration to execution. While the process involves careful planning, compliance, and significant capital, it also opens the door to full commercial success in Southeast Asia’s largest economy.
By partnering with InvestinAsia, you gain a trusted guide that reduces risks, accelerates timelines, and ensures long-term compliance—so you can focus on growing your business in Indonesia.
FAQs
Can I convert my Representative Office into a PT PMA?
No. Indonesia does not allow direct conversion. You must close the Representative Office and register a PT PMA as a new legal entity.
How long does the transition take?
Closure of the KPPA and establishment of a PT PMA can take 6–8 weeks in total, depending on document readiness and licensing speed.
What’s the minimum capital for a PT PMA?
IDR 10 billion (USD ~700,000) is the general minimum, with a paid-up portion of IDR 2.5 billion (USD ~185,000). Capital requirements vary by sector.
Do you need a local partner to start a PT PMA?
No. 100% foreign ownership is allowed in many sectors, subject to the Investment List. However, some sectors have foreign ownership caps.
What is BKPM’s role?
BKPM (Indonesia Investment Coordinating Board) is the central agency that approves foreign investment licenses and supports business setup.
Reference:
Indonesia Investment Coordinating Board. (2022). Indonesia Investment Guidebook. Retrieved from https://ppid.bkpm.go.id/wp-content/uploads/2022/09/Indonesia_Investment_Guidebook.pdf
