How to Establishing a Representative Office in Indonesia

Establishing a representative office is the fastest way to get a legal presence in Indonesia and it is easier than setting up a limited liability company. But it comes with more limitations.

Note that in the Indonesian context representative office is not the same as a branch office. So if you are looking to establish a local entity that is free to earn revenue, import products etc. then you need to set up a foreign direct investment (PT PMA) company.

In this article we explore the benefits of representative office and in which cases you should prefer it over limited liability company.

How to Establishing a Representative Office in Indonesia

What is a representative office?
First of all, there are two types of representative offices in Indonesia – a general representative office (Kantor Perwakilan Perusahaan Asing – KPPA) and representative office for trading (SIUP3A). In the context of this article we talk about the former.

Representative office is defined as an office set up by a foreign company or company located outside of Indonesia in order to take care of its business interest in Indonesia. This can also involve the preparations for establishing a foreign owned company in the future.

Therefore in order to qualify for a representative office, you must have an existing legal entity already. This will also be the entity through which all the financial transactions will be handled and in this article we call it the parent company.

Roles and limitations of a representative office

• Office activities are limited to its role as a supervisor, liaison, coordinator and representative of the interest of the parent company
• Office is not allowed to generate income, all transactions will be handled by the parent company

Benefits of representative office
As you could see from the role of representative office, it is not a substitute to opening a limited liability company (PT PMA) as it won’t be able to act as a separate entity. However, there are several reasons why many foreign companies choose a representative office over PT PMA.

1. No capital requirement
Foreign owned companies are required to have investment plans for at least US$1.2 million and paid up capital of US$300,000. This is not a small amount and in many cases the investors want to test the market first before making such capital commitments.

As representative office you won’t have any capital and therefore the capital requirements don’t apply. For some investors it also means that they won’t have to play with the minimum capital and do everything by the law.

2. Handle the sales and delivery
As a representative office you are still allowed to do the sales and delivery of your products/services. The restriction is that you need to charge your clients from your parent company. In many cases your Indonesian clients will accept it and you can delay opening a PT PMA until you have gained a strong client portfolio.

3. You are still entitled to non-permanent stay permit (KITAS)
Just like a PT PMA, representative office can apply non permanent stay permits (KITAS) to its foreign experts. You will be able to legally stay and work in Indonesia.

Timeline of establishing representative office
Due to the simplified process, setting up representative office is much faster than limited liability company. The steps are following:

Documents obtained                          Timeline (working days)
BKPM Approval of Representative Office   3-5
Domicile Letter                                            3-5
Tax registry                                            2
TDP/ Company Registry                            14-21
Indosight offers the service of establishing representative office. In order to get a quotation, go to the representative office page and tell us about your company.