Benefits of Setting up A Representative Office in Indonesia

A representative office in Indonesia is one of the easiest business structures a company can set up in the shortest period of time. It allows companies to explore the possibility of expanding their businesses to Indonesia. 

Opening a representative office in Indonesia does come with its limitations and benefits. In addition, for businesses looking to expand in new markets, you need to be aware of the types of representative office available in the country. In this article, Cekindo will highlight the many benefits of opening a representative office in Indonesia.

Benefits of Setting up a Representative Office in Indonesia

The functions of a representative office are to do market research, liaise with potential partners, supervise and coordinate activities that are of the interests of the parent company. However, any commercial activities that generate income in Indonesia are prohibited for the representative office in Indonesia. 

A foreign company can set up a representative office in Indonesia given that it has already had a legal parent company established outside of Indonesia. Companies often set up a representative office before they set up a PT PMA (foreign-owned company) in Indonesia. 

When setting up a representative office in Indonesia, foreign investors can enjoy noteworthy benefits such as: 

Opening a Bank Account in Indonesia

A representative office is allowed to open a bank account in Indonesia as long as it is established. This advantage is crucial as it enables you to have smooth and fast transactions in Indonesia as well as with your parent company. 

Zero Minimum Paid-Up Capital

Unlike setting up a foreign-owned company (PMA) which requires a minimum paid-up capital of at least US$175,000 (approximately IDR 2.5 billion), a representative office in Indonesia does not require any minimum paid-up capital. As such, foreign investors are able to have a market presence in Indonesia legally at relatively low costs. 

Hiring Staff

In addition to zero capital and having a market presence, a representative office in Indonesia lets you hire local and foreign employees legally. 

Applying for KITAS (Limited Stay Permit)

As a foreigner, you will need to have a KITAS to be able to stay and work in Indonesia legally. Therefore, setting up a representative office in Indonesia allows you to apply for KITAS for your foreign executives. 

Managing Sales and Delivery

Although a representative office is forbidden to participate in any activities that generate profits, it is allowed to handle sales and delivery of its own products or services. You just need to make sure that the customers you sell your products or services to are charged under the parent company’s name. 

Many foreign investors take advantage of this and postpone their PT PMA setup until they have established a stronger and more solid customer base. 

Types of Representative Office in Indonesia

In general, three types of representative office can be found in Indonesia:

Foreign General Representative Office (KPPA)

A KPPA in Indonesia is more general and is used for management and coordination purposes between affiliated companies and the parent company. It is often used to study the markets in Indonesia to get ready for market entry with a PT PMA. 

A KPPA license is valid for a maximum of 3 years and extendable. 

Foreign Trade Representative Office (KP3A)

A KP3A in Indonesia can perform what a KPPA can. In addition, a KP3A acts as a selling, manufacturing and buying agent for its parent company. However, just like other types of representative office in Indonesia, a KP3A can’t issue invoices. All transactions in Indonesia must be done under the name of its parent company.

A temporary KP3A license is valid for 2 months, and a permanent KP3A license is valid for 12 months. Both licenses are extendable. 

Foreign Construction Representative Office (BUJKA)

A BUJKA representative office is suitable for foreign companies in construction services. Unlike setting up a construction company in Indonesia, with a BUJKA, you can avoid time-consuming and expensive red tape.

To set up a BUJKA, you will need to qualify for SIUJK license, which is valid for 3 years and extendable. 

How Cekindo can Assist

For more information to set up a representative office in Indonesia, contact Cekindo now and our experienced consultants will be glad to assist you. 

You can also purchase your representative office online with Cekindo and have your representative office up and running in no time. Establishing a market presence in a country as big as Indonesia has never been easier.

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