There are several types of Indonesian Representative Office (“RO”) as below:
- Foreign Company General Representative Office or known as “KPPA”;
- Foreign Company Trading Representative Office or known as “KP3A”;
- Foreign Company Construction Representative Office or known as “BUJKA”; and
- Foreign Company Oil and Gas Representative Office.
In this article, we will elaborate more on the KPPA and KP3A.
The purpose of KPPA and KP3A is to help the investor test the Indonesian market prior to opening the PT PMA which requires minimum capital investment.
Opening KPPA and KP3A does not require any minimum capital investment. However, KPPA and KP3A do not allow for generating revenue, thus, the invoice shall be issued by the parent company to receive the money. In addition to the operational costs of the KPPA and KP3A, the parent company shall support the cash flow to the KPPA and KP3A. KPPA and KP3A are the type of representative offices that shall be established and located in the capital city of the province.
The requirements and activities of KPPA and KP3A are limited to:
- as supervisor, liaison, coordinator, and manage the interest of the parent company or its companies’ affiliation;
- to prepare the establishment or the business development of a foreign investment company in Indonesia or in another country;
- located in an office building in the provincial capital;
- not looking for revenue in Indonesia, and it is not allowed in carrying out activities or doing something related to the commercial transaction of sales and purchasing goods or services with companies or individuals in Indonesia; and
- not participating in any form in the management of a company, subsidiary, or branch company in Indonesia.
RO’s Establishment Process in Indonesia
RO shall obtain a license from Indonesian Investment Coordinating Board (“BKPM“) through OSS system. The requirements for registering the RO are as follows:
- Article of Association of the parent company in English or Bahasa Indonesia version;
- Letter of Appointment which is legalized by the Indonesian embassy or Indonesian trade attache where the parent company is located;
- Letter of Intent which is legalized by the Indonesian embassy or Indonesian trade attache where the parent company is located;
- Letter of Statement from the Chief Representative Office (“CRO“) which stated their willingness to stay in Indonesia and only work as CRO without doing any other business in Indonesia; which legalized Indonesian embassy or Indonesian trade attache where the parent company is located;
- Letter of Reference issued by the Indonesian embassy or Indonesian trade attache where the parent company is located;
- Passport photo of CRO in color; and
- Identity information of the CRO such as passport (for foreign CRO) or KTP and NPWP (for Indonesian CRO).
If the parent company only has one director, he/she cannot appoint himself/herself as the CRO since the CRO is required to stay in Indonesia without doing any other business in Indonesia. The RO registration process would take 5 to 8 business days.
Employment under KPPA and KP3A
The CRO must stay in Indonesia and is not allowed to hold a double position in the other company. If the CRO is a foreigner, then he/she must obtain a stay and work permit to comply with the applicable law.
The RO shall also pay the compensation funds for foreigner recruitment to the government which is known as DPKK (Dana Pengembangan Keahlian dan Keterampilan/Skill Development Fund). The compensation fund is in the amount of USD100 per position per person per month that is paid to the government. The length of stay of foreign workers as provided in the stay permit will be decided and granted by the Ministry of Manpower which is usually in the period of 6 to 12 months.
Disclaimer: This article is for information purposes only and does not constitute any legal advice. For more details on expert guidance and support for company registration in Indonesia, please reach us by filling out the form below.