For any company, entering a new market is a strategic move. The company can achieve business growth by expanding its operations and gaining market share in a new area. However, it requires careful preparation and execution to ensure success. For example, before deciding to expand to another country, conducting market research is essential to explore possible business opportunities. One way to do it is by establishing a representative office.

A representative office offers a low-risk and cost-efficient entry point into a new market. It allows companies to explore local conditions, gather market intelligence, and establish brand presence without the regulatory and financial burdens. This article will examine the requirements and process for establishing a representative office in Indonesia.

What is a Representative Office in Indonesia?

A representative office (RO) in Indonesia refers to an office used by foreign companies to establish a presence without engaging in sales or revenue-generating activities. These activities office include market research, networking, and future business expansion before fully committing to a commercial entity. It’s typically easier to establish with fewer licenses and regulatory requirements. A representative office is not considered a separate legal entity as it only acts as a liaison between the parent company and local contacts. 

Types of Representative Office in Indonesia

There are several types of representative offices in Indonesia, each with different needs and objectives:

KPPA (Kantor Perwakilan Perusahaan Asing)

KPPA, also known as the General Representative Office of a Foreign Company, is one of the most common types of representative office in Indonesia. It operates as a non-commercial entity, representing the parent company in Indonesia, for activities such as market research, coordination, networking, and business development. It cannot engage in local business transactions or generate revenue. The office is usually located in the provincial capital and led by appointed representatives from the parent company.

KP3A (Kantor Perwakilan Perusahaan Asing untuk Perdagangan)

The KP3A or Representative Office of a Foreign Trading Company primarily focuses on promoting products and facilitating trade activities between the parent company and its Indonesia partners. It acts as a selling, manufacturing, or buying agent, but cannot issue invoices or conduct sales contracts. KP3A can be located beyond provincial capitals, including regencies or cities.

BUJKA (Badan Usaha Jasa Konstruksi Asing)

BUJKA (Representative Office for Foreign Construction Service Companies) is exclusive to foreign construction service companies, allowing them to research and coordinate construction projects in Indonesia. Unlike KPPA and KP3A, foreign companies can execute projects in Indonesia through a joint operation with BUJKA and a local construction organisation. 

KPPA Migas (Kantor Perwakilan Perusahaan Asing Minyak dan Gas)

KPPA Migas (Representative Office for Foreign Oil and Gas Companies) is a type specifically for foreign companies operating in the oil and gas sector. It is established to conduct non-commercial activities. For example, conducting feasibility studies and liaison with local partners and authorities, while prohibiting direct extraction or other profit-generating activities.

The Advantages of Setting Up Representative Office in Indonesia

Indonesia has become the ideal location to set up a representative office due to its market potential. Here are the advantages of setting up a representative office in Indonesia:

Cost-Effective Market Entry

Representative offices enable foreign companies to enter the Indonesian market with a minimal financial commitment before setting up a full-fledged legal business entity. Since it requires no initial capital, setup and operational costs are much lower. It’s ideal for companies seeking to explore the market before launching a full-scale business.

Full Foreign Ownership

Representative offices in Indonesia are 100% foreign-owned. They are quite different from other business forms, which may require local partners or have ownership restrictions. This allows foreign parent companies to maintain full control and direct oversight of the office’s activities in Indonesia, facilitating smoother coordination and decision-making.

Strategic Positioning

A representative office serves as a strategic foothold for foreign companies in Indonesia. It allows for direct interaction with local partners, government authorities, and customers, helping to build brand presence and networks. It also provides valuable insights into local regulations and market trends, enabling foreign companies to make informed decisions before expanding into full commercial operations.

Requirements to Set Up Representative Office in Indonesia

Looking to establish a representative office for your company in Indonesia? Understanding the requirements is crucial to ensure your setup process runs smoothly and complies with Indonesia’s legal frameworks:

• Letter of Approval from the Investment Coordinating Board (BKPM)
• NPWP or Tax Payer Registration Number
• Business Identification Number (NIB) from the Online Single Submission (OSS)
• Letter of Appointment and Letter of Intent from the parent company
• Letter of Recommendation from the Indonesian Embassy or the Indonesian Investment Promotion Centre (IIPC) in the parent company’s location
• Parent company’s latest financial statements
• Parent company’s Articles of Association
• Copy of a valid passport (for foreigners) or a copy of the ID card number (for Indonesians) of the person being proposed as an executive in the representative office
• Letter of Commitment stating the willingness to stay and only work in the position as a Representative Office Executive without doing other business in Indonesia

How to Set Up a Representative Office in Indonesia?

Establishing a representative office in Indonesia is easier when you understand the process. KPPA is one of the easiest types to develop for various kinds of companies, so here’s the breakdown on how to set up KPPA:

Meet the Requirements for KPPA

Before establishing KPPA, your company must meet several requirements, for example:

• The representative office must be led by one or more foreign citizens or Indonesian citizens who act as office managers, as specified in the Letter of Appointment issued by the parent company.
• The office’s activities are limited to their roles as administrators, liaisons, coordinators, and managers of the company’s or its affiliated companies’ interests in Indonesia.
• The office managers must reside in Indonesia.
• The office must be located in an existing office building.

Register to BKPM

The request for a permit to establish KPPA is submitted to the Head of the Investment Coordinating Board (BKPM). Registration can be completed through the OSS system (https://oss.go.id). You should prepare several required documents as stated above, including a power of attorney if your company management does not apply. 

After submission, the KPPA permit is issued and signed by the Head of BKPM or a designated official. The copies will be addressed to the Minister of Finance, the Minister of Manpower and Transmigration, the Head of the Indonesian Representative Office in the company’s country of origin, and the governor or mayor of the relevant area.

Report to PTSP-PDPPM

After receiving the permit, you can immediately report to the PTSP-PDPPM for guidance and assistance in completing the regional license. This step must be completed within three months of the approval letter being issued. These permits include a Company Domicile Certificate, Taxpayer Identification Number (NPWP), Taxpayer Confirmation Letter, Company Registration Certificate, and other permits.

Set Up Your Professional Representative Office Easily with Effist Suite Office

Ready to establish your representative office? Effist Suite Office provides the perfect solution to support your office needs without hassle. We offer premium serviced office solutions located in South Jakarta’s prime business locations: Office 88 Kota Kasablanka and Gandaria 8 Office Tower. 

Our office spaces are fully equipped with ergonomic workstations, high-speed internet, executive-grade work equipment, meeting rooms of various sizes, a business lounge, and a pantry. We also offer dedicated support services, including cleaning services, a professional receptionist, and a dedicated phone number handled by experienced customer service team. This all-in-one solution allows you to focus on running and expanding your business while we take care of the workspace. With Effist, setting up a representative office becomes simple, seamless, and growth-oriented.

For more information about our serviced office, please contact us via email contact@effist.com. 

Editor: Trie Ayu Feminin & Irnadia Fardila