Representative Office: Details Please

There are many roads to Rome…

Or so as the saying goes. It is a well-known secret when it comes to building PT PMA (Foreign Investment Company) in Indonesia, foreign investors might find themselves facing a tumultuous and taxing journey. From significant paid-up capital to having to gain certain business licensing, the journey to establishing a PT PMA could prove to be arduous. 

Yet, what if, foreign investors can instead take a more steady approach for their establishment of PT PMA

Introducing the ‘Representative Office’

A representative office is an establishment that is led by appointed representatives (whether foreign nationals or Indonesians) of a foreign company to manage said foreign company’s interests or its affiliates, and to prepare for its enactment and development to become a Foreign Investment Company (PT PMA) here in Indonesia. Nevertheless, representative offices have certain limitations. For example, a representative office is not capable of conducting commercial activities. This means, it cannot conduct profit-generating activities, issuing invoices, and entering into contracts. Foreign investors, however, can own 100% of this business entity and don’t have to contribute the same paid-up capital required by PT PMA.

Well, alright. But what kinds of representative offices can I establish?

According to BKPM Regulation 4/2021 on Guidelines and Procedures For The Supervision Of Risk-Based Business Licensing (“BKPM Regulation 4/2021”), there are four criterias of representative offices:

1. Representative Office of Foreign Trading Company (“KP3A” or Kantor Perwakilan Perusahaan Perdagangan Asing)
   The Representative Office of Foreign Trading Company or also called as ‘KP3A’ is a business entity that conducts its work within the ‘Trade through Electronic Systems’ (Perdagangan Melalui Sistem Elektronik or “PMSE”) sector. The KP3A is an office establishment that is led by one or more individuals (whether Indonesian or foreign citizens) appointed by a foreign ‘Trading Organizer through Electronic Systems’ (Penyelenggara Perdagangan Melalui Sistem Elektronik or ‘PPMSE’) as their representatives in Indonesia.
2. Foreign Company Representative Office (“KPPA” or Kantor Perwakilan Perusahaan Asing)
   A foreign representative office is basically a representative office by definition. As was mentioned previously, a ‘Representative Office’ is led by appointed representatives whether foreign nationals or Indonesians. In the case of a ‘Foreign Company Representative Office’, the appointed person can only be a foreign citizen.
3. Representative office of Foreign Construction Service Business Entity (“BUJKA” or Badan Usaha Jasa Konstruksi Asing)
   Representative office of Foreign Construction Service Business Entity (Badan Usaha Jasa Konstruksi Asing or ‘BUJKA’) is an enterprise that is established and domiciled under a foreign country’s law which owns representative office in Indonesia and has the same legal status as a Limited Liability Company (“LLC”) in the construction service sector. For a BUJKA to be established, the enterprise must own Business Entity Certificate (Sertifikat Badan Usaha or “SBU”). When it comes to BUJKA, it contains several classifications that are needed to be taken note of as each classification requires its own certification. In brief, these include:
   1. Architectural Plan; 5. Engineering Surveillance;
   2. Engineering Plan; 6. Spatial Planning Surveillance;
   3. Spatial Planning Plan; 7. Specialist Consultation; and
   4. Architectural Surveillance; 8. Other Consultation Services.
   Note: Further information regarding BUJKA will be discussed in our upcoming articles. Make sure to stay tune!
4. Representative office of foreign electricity support services (JPTLA)
   Representative office of Foreign Electricity Support Services is established by private business entity or foreign individual that carries out electricity supporting services business.To be established as such, JPTLA must obtain ‘Business Licensing’ and ‘Certificate of Electricity’ for supporting service business entities. There are three classifications of JPTLA: Consultancy in the Electricity Installation sector; Construction and installation of Electricity; and Maintenance of Electricity Installations.

Additional Notes

1. PMSE means trading transaction that is conducted through a set of electronic devices and procedures.
2. PPMSE is a Business Actor that provides electronic communication facilities used for trading transactions.
3. SBU means sertifikat tanda bukti pengakuan formal atas tingkat/kedalaman kompetensi dan kemampuan usaha dengan ketetapan klasifikasi dan kualifikasi Badan Usaha. (Pasal 1 ayat 15)
4. Representative office of a foreign company must be established in one of the capital province in Indonesia.
5. All necessary permits regarding the representative office and its foreign workers are issued by the relevant minister and/or Head of the Investment Coordinating Board (BKPM Regulation 5/2021).

SOURCES

Laws & Regulations

• Presidential Decree 90 of 2000 on Representative Office
• BKPM Regulation 4 of 2021 on Guidelines and Procedures For The Supervision Of Risk-Based Business Licensing
• Regulation of Board of Management Development Institutions’ National Construction Service 1 of 2015 on Foreign Construction Service Registration
• Regulation of the Government 25 of 2021 on The Organization of The Energy and Mineral Resources Sector
• Regulation of the Minister of Trade 31 of 2023 on Business Licensing, Advertising, Development, and Supervision of Business Actors In Trading Through Electronic Systems

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