Representative Office (KPPA)

Why Do You Need to Establish a Representative Office in Indonesia?

Establishing a representative office in Indonesia is the right step to try to see the potential of business in Indonesia in the future without having to spend huge amount of investment capital.

The government has prepared and provided many facilities and conveniences to prospective foreign investors. One of them is by allowing foreign companies to open their representative offices in Indonesia before they actually invest heavily in Indonesia by establishing a company in the form of PT, PMA. Thereby, the main purpose of establishing a representative office in Indonesia is to test the water before the actual establishment of the company.

Unlike the representative office of foreign trade (Kantor Perwakilan Perdagangan Asing, KP3A), the representative office of foreign companies (Kantor Perwakilan Perusahaan Asing, KPPA) is only allowed to operate at the maximum of 5 years and it cannot be extended. After 5 years, the legal entity must be changed to a PMA company. Thereby, a representative office can conduct market research, approach potential clients, and build brand awareness of your business. However, this company is not allowed to carry out business transactions and issue invoices since activities that generate profits are not allowed. This is the main factor that distinguishes between representative companies in Indonesia from other legal entities such as Limited Liability Company (Perseroan Terbatas, PT), Foreign Investment (Penanaman Modal Asing, PMA), and Domestic Investment (Penanaman Modal Dalam Negeri, PMDN).

Type – Foreign Representative Office

1. KPPA – Kantor Perwakilan Perusahaan Asing (Foreign Company Representative Office)
2. KP3A – Kantor Perwakilan Perdagangan Asing (Foreign Trade Representative Office)

KPPA – Kantor Perwakilan Perusahaan Asing (Foreign Company Representative Office)

Is a representative office to carry out promotional activities and analyze the market before establishing a PMA. The validity period of the permit is at the maximum of 5 years and cannot be renewed after 5 years since the company must switch to Foreign Investment (PMA) or must be closed.

For KPPA, you can simply attach a Letter of Appointment, Letter of Statement, Letter of Attorney. Also, Letter of Intent and Letter of Reference from the Embassy are not required.

KP3A – Kantor Perwakilan Perdagangan Asing (Foreign Trade Representative Office)

Is a representative office to carry out promotional activities of trades and analyze the market. Firstly, you will obtain business license for 2 months, then business license for 1 year, then a permanent permit that is valid for 3 years, which and can be extended every 3 years indefinitely. It is not required to change to PMA.

For KP3A Trade, Letter of Appointment, Letter of Statement, Letter of Attorney, Letter of Intent and Letter of Reference from the Embassy are required.

Benefits of Representative Office in Indonesia

Low Establishment Cost

As we explained at the beginning, having a representative office in Indonesia is the right way as you can carry out a market research in Indonesia at a low cost. You can collect the data necessary to convince your target audience or the presence of your business partners who can supply raw materials for the products you are about to produce. Furthermore, these business partner companies will help you understand the Indonesian market really well.

Becoming Visa Sponsor

The existence of a representative office in Indonesia can help you to become a sponsor/guarantor for residence visa applications for foreigners who will be the leaders of the company and also for foreign employees who will work in your company in Indonesia. Although representative offices are not permitted to carry out transactions and generate income, by having complete corporate legality, the representative office reserves the right to sponsor visa applications and residence permits for all foreigners who will work or who will visit their offices.