Category: Business Establishment & Licenses
Written by Samuel Sri Kurnia on 13/04/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.
To expand the scale of business overseas, the role of a Representative Office (RO in short) is needed. RO’s existence of a foreign company provides convenience in terms of time for companies who are interested in international investment. Through the role of a representative office, the foreign company can quickly learn more about the market in the destination country. Furthermore, the company can develop more advantageous business from the results of the conducted study.
This article covers pieces of information regarding steps in setting up a RO in Indonesia. With the benefits and relatively quick steps, foreign companies may pique their interest in investment after reading the comprehensive details below.
A Representative Office could be defined as a service from foreign business companies in exploring the circumstances or providing investment inside a country. For the case in Indonesia, RO is regulated in Indonesia’s Investment Coordinating Board (Badan Koordinasi Penanaman Modal / BKPM) Regulation 13/2017 about Guidelines and Procedures for Licensing and Investment Facilities. This guideline was further supported by Presidential Regulations 91/2017 regarding the Acceleration of Business Implementation program. Through this plan, the Indonesian government hopes to open opportunities for overseas entrepreneurs to invest in Indonesia.
It is recommended for foreign companies to set up an RO at the beginning of their business in Indonesia due to its convenience. Establishing an initial presence could help the company learn about the business environment through market research. The process also requires lesser investment capital and faster document processing.
There are 4 types of an RO in Indonesia based on its industry according to BKPM. These ROs are:
Setting up a RO for your company can be done through different stages, based on its category. Different types also require specific documents during the process of establishment.
For each RO, the requirements needed are as follows:
While an RO in Indonesia functions specifically for market research, respective foreign companies can still enjoy some benefits, such as:
Although the benefits of establishing an RO may seem abundant, there are still restrictions for activities based on regulations in Indonesia. Generally speaking, the restrictions are:
For investors planning to approach the Indonesian market, Putranto Alliance can assist you in establishing an initial presence through a Representative Office. Investors can set up RO for supervisory, administrative, or marketing functions (to test the Indonesian market), but not for commercial transactions in Indonesia. The parent company will need to establish a foreign investment company (Perseroan Terbatas Penanaman Modal Asing/PT PMA) if you want to start commercial operations in Indonesia.
We can help you obtain the relevant approvals from BKPM through the OSS system and apply for a Representative Office Tax Identification Number. Although an RO does not receive income, there are still tax obligations such as withholding income tax for employees’ salaries, service fees, and rental expenses.
Simply check the FAQs below or contact us through our website if you still have any questions regarding opening RO for your company.
Peraturan Menteri Perdagangan tentang Perubahan Kedua atas Peraturan Menteri Perdagangan Nomor 10/M-DAG/PER/3/2006 tentang Ketentuan dan Tata Cara Penerbitan Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing
Indonesia is an Asian country with abundant natural resources, sustained by varying bio-diversities and ecosystems. It is more promising with the recent issue of the development of the new capital city of Indonesia in Kalimantan by 2024.
There are no specific qualifications, but KPPA or KP3A has to be located inside an office building. With recent IT development, a foreign company can develop a virtual office or serviced office services. Please note that a virtual office needs a minimum specification of operational office space, at least an apartment.
It depends on the type of RO (KPPA, KP3A, or BUJKA). But it would be around 1-1,5 months for opening one. Please note it requires more documents for establishing a BUJKA, so expect the process to be longer for construction sector companies.
Foreign companies can employ both foreign and local manpower to work in RO. But please note that foreign manpower can only be employed for a certain position and department. The employee may be classified into 2 types based on their working relations, which to be a permanent employee or for a specified period. The usage of outsourcing manpower is also allowed.
It depends on the type of RO (KPPA, KP3A, or BUJKA). But in any province, district, or city of Indonesia in general. KPPA would need to be specifically located on the province level, while KP3A or BUJKA can be on a smaller level.
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