Representative Office Types in Indonesia
Another business entity which exists in Indonesia is that of the representative office. Representative offices are related to a specific foreign company; this foreign company is known as a parent company. There are four types of representative offices in Indonesia; these are the general representative office (KPPA), representative office for trading (KP3A), representative office related to foreign construction companies (BUJKA), and representative office related to foreign oil and gas companies (KPPA Migas).
There are restrictions placed on the business activities of a KPPA. A KPPA is only permitted to oversee the interests of its parent company as well as any companies affiliated with the parent company. A KPPA may not earn any revenue in Indonesia; neither may it issue invoices. Its business location must be in the capital city of any province of Indonesia. The license of a KPPA is valid for three years but may be extended through the use of a Letter of Appointment. It usually takes approximately 13 working days to set up a KPPA.
A KP3A is used by a parent company for the purposes of manufacturing, sales, and purchases in Indonesia. It also oversees the establishment of the Indonesia-based branch offices of the parent company. Its transactions are to be in the parent company’s name and may not issue any invoices. It may be located in any major city of Indonesia. A KP3A’s temporary license is valid for two months; its permanent license, one year. The validity duration may be extended by using a Letter of Appointment. The usual duration of the KP3A setup process is around 16 working days.
Foreign construction companies may choose to establish a BUJKA in Indonesia. Doing so allows these companies to collect information related to construction projects in Indonesia, hire local and foreign experts, participate in tenders, and open an Indonesia-based bank account. However, before a BUJKA may provide construction services, it must first enter a joint venture with a company which provides local construction services. BUJKAs must be related to large construction service companies and must also have an official construction service business license. A BUJKA’s license is valid for three years and is extendable. The process of setting up a BUJKA is fairly lengthy, clocking in at approximately 43 working days.
Foreign oil and gas companies have the option of establishing a KPPA Migas in Indonesia. A KPPA Migas is used by such companies to help establish a permanent establishment in the country. Its license is valid for three years and may be extended. Prior to establishment, the owner of a KPPA Migas requires a recommendation letter from the Ministry of Oil and Gas; this letter is to be submitted to the Indonesian Investment Coordinating Board (BKPM). It takes around 27 working days to set up a KPPA Migas.
Similarities and Differences Between Companies and Representative Offices
One of the key similarities between companies and representative offices in Indonesia lies in the fact that both categories of business entities include multiple business types. This therefore makes it easier for anyone who plans to start a business in Indonesia because they would then have more options, allowing them to select the business entity which best suits their corporate needs. Both companies and representative offices alike are led by one or more directors. Certain types of companies and representative offices require licenses before they may commence any business operations. Representative offices must be linked to foreign-owned companies; similarly, foreigners may own a company under certain circumstances. Both companies and representative offices are also driven by profits.
However, companies and representative offices in Indonesia also differ in several important ways. Companies are owned by the government or people, but representative offices are owned by foreign parent companies. Certain representative offices are reserved for those in the oil and gas or construction industries; such do not exist with regard to companies. Some types of representative offices have restrictions on their possible location. Once again, companies are not subject to such a restriction. Although both companies and representative offices seek to generate profits, companies do so in the name of the government or in their own name while representative offices do so in the name of the parent company.
Anyone who plans to commence any business operations in Indonesia must carefully consider the business entity to be set up. Those who already own a foreign company may choose to arrange for the setup of a representative office in Indonesia. Those who do not can easily choose to set up a company. In either case, the growth and increasing power of Indonesia’s economy and corporate scene have created much expansion of business opportunities in the country.
We at Paul Hype Page & Co are able to assist you in taking advantage of such opportunities. Regardless of the business entity which you plan to establish, we will be able to guide you through the entire incorporation process by providing you with the best of our services. Once we have finished working with you, you will have an Indonesia-based business of your own; you may then proceed to do as you will with it. Please contact us for further information.