Foreign Representative Office (KPPA) in Indonesia: Introduction
Foreign Representative Office (or KPPA/Kantor Perwakilan Perusahaan Asing) is a legal business entity which represents the foreign company’s interests since the activity of a Representative Office/KPPA is limited to exploring the local markets. A Representative Office’s main purpose is to coordinate, supervise, organise, and represent the main company (mainly overseas parent companies) while also preparing the development and establishment for the main company.
However, it, should be duly noted that a Representative Office isn’t allowed to conduct trade and sales transactions, commit to a contract, conduct tender application, and other commercial activities; and is not allowed to become a member of the management of a company, branch, or subsidiary in the country.
For example; Big corporations like Google and LINE Corp have their own Representative Office in Indonesia to organise and represent the main company in the country and their main purpose is to maintain their product (e.g: Google’s programs) runs smoothly while also coordinating with the head office overseas.
- Types of Representative Office
Under Indonesia’s regulation regarding Foreign Representative Office (Representative Office), which is the late BKPM Rule Number 4/2021 (Peraturan BPKM No. 4/2021) there are at least four types of Representative Offices;
- General Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing/KPPA)
- Foreign Trade Company Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing/KP3A)
- Foreign Construction Company Representative (Perwakilan Badan Usaha Jasa Konstruksi Asing/PBUJKA)
- Representative Office of Foreign Oil and Gas Company (Kantor Perwakilan Perusahaan Asing Minyak dan Gas Bumi/KPPA Migas)
The first one is the most general type of Representative Office in the country which we’ve explained briefly in the introduction part. The Foreign Trade Company Representative Office (KP3A) has its particular activities in introductory and promotional activities and doing market surveys, and acts as a selling, buying, and manufacturing agent for the parent company—while still prohibiting the Representative Office engaging in any trade or sales activities.
The latter two kinds of Representative Office are specifically designed for each of their businesses, while also requiring more specific paperwork and licences. We will explain more details about each kind of type in our next article, so kindly stay on board!
- Characteristics: Advantages and Disadvantages in establishing a Representative Office
Based on the characteristic, regulation, and prohibition, there are a lot of advantages for you in establishing a Foreign Representative Office in Indonesia, although there are still a few disadvantages of the matter.
Advantages
Foreign Representative Office is one of the fastest and simplest ways to establish your business in Indonesia, especially after the Indonesian Omnibus Law came forward, the licensing process of a Representative Office became more simple and worry-free. This might be one of the biggest advantages in developing your business in Indonesia through Representative Office.
On the other hand, allowance to be 100% foreign-owned, no investment required, and unneeded presence of shareholders and board of directors are all the other advantages of a Representative Office establishing a Representative Office.
Disadvantages
However, the restriction to do sales and business activities and limited marketing activities are the disadvantages for a Representative Office. Still, establishing a Representative Office for your business might be a safe way of ‘testing the water’ before the full-sized company incorporation (as a PMA).
- Is It The Best Business Entity For You?
In short, Foreign Representative Office or KPPA is an efficient and fast way for foreign businesses to build a market presence in Indonesia; even with its restrictions in business activities. Interested to expand your business by establishing a Representative Office in Indonesia? Izin.co.id can help you through all your business establishment obstacles and guide you to create the best decision for your business. All processes will also be notified through our tracking system. Click the link below!
