Representative Office Setup in Indonesia: Process and Requirements

Foreign companies have three legal options for setting up a business or investing in Indonesia:

1. Foreign Direct Investment Limited Company (PT PMA), where foreigners become shareholders
2. Limited Liability Company (Local PT), owned 100 percent by Indonesians, but which can be converted to PT PMA later
3. Representative Office

Of the three, the last one is the easiest, fastest, simplest, and cheapest to set up. Compared to the others, representative office registration in Indonesia is more straightforward, with no capital requirement.

The disadvantage of a representative office is that it cannot participate in various economic activities, such as buying and selling goods. It could not generate any profit. Further, it requires document renewals as well.

On the other hand, the good news is that it can still be helpful for your business in many ways, such as:

• Conducting market research
• Searching for potential local partners and suppliers
• Supervising and establishing your branches around the country
• Set up in several capital provinces
• Hire foreign workers
• Establish PT PMA to generate revenues after 5 years
• Work as a buying and selling agent for the mother company

Representative Office Registration in Indonesia

The process of opening a representative office depends on the type. There are three types of Representative Office as follows:

1. Foreign Construction Representative Office

Construction is one of the most robust industries in Indonesia today. It improves infrastructure, ramps up the GDP, and makes the country more attractive to foreign investment. However, it remains highly regulated.

If you want to be part of the booming construction industry, you can set up a foreign construction representative office. Your company’s role covers consultation, implementation, and supervision of construction work. You have the option to hire both foreign and local workers.

However, due to the nature of the industry, conditions are many:

• Construction projects should be complex, high-risk, and high-technology.
• You should establish a limited liability company, which means you need to partner with a local construction company.
• In joint operations, at least 50 percent of the construction work value should be in the country, while the local company performs 30 percent of the work value.
• In construction planning, the local company performs 50 percent of the work value, while the entire work value is done here in Indonesia.
• Contractors should have a minimum of 10 years of working experience, with a total of IDR 83.33 billion or a cumulative amount of at least IDR 250 billion.

To set up your construction representative office legally, you have to:

1. Get an expertise certificate (SKA).
2. Sign up for an association membership.
3. Get an SBU certificate from LPJK (Indonesia Construction Service Development Board).
4. Obtain the BUJKA permit from the BKPM (Indonesia Investment Coordinating Board).
5. Process your domicile permit.
6. Have your tax registration number (NPWP)
7. Process your SIUJK (construction business permit) from the local government where you are operating.
8. Have your company registration number (TDP).

The process is complicated, lengthy, and may be confusing for many people, given the numerous documents and fees involved. We can assist you in obtaining all necessary licenses for a representative office registration in Indonesia.

2. Foreign Representative Office

The simplest of your options is a general foreign representative office, which can perform a variety of miscellaneous tasks on behalf of the parent company. To set up a Foreign Representative Office, the steps are as follows:

1. Choose an office representative who will be the Chief Representative of the Office.
2. Gather the documents needed, such as a work permit and resume of the company representative, notarized letters of intent and appointment, and a reference letter.
3. Submit the paperwork to BKPM.

It takes approximately two months to receive all your licenses, including the Approval of Representative Office from BKPM, Domicile Letter, Company Tax ID, and Company Registration Certificate.

Although the process is straightforward, you may have concerns about securing an Indonesian work permit quickly. We can help you in this area. Further, with our team of lawyers, you can have a power of attorney if you wish us to process the application on your behalf.

3. Foreign Trade Representative Office

Despite its name, this office is not authorized to engage in direct commercial transactions within the country. It can act as a selling or buying agent, but should do so on behalf of the mother company. It also cannot issue invoices. However, it is a good office to set up for any marketing-related activities.

The process of having a foreign trade representative office is very similar to option 2. You still need to have someone to manage it. However, only those with at least three years of working experience and a related educational background can work as a representative head or assistant to the primary representative.

To set up this office, there are several steps to follow:

1. Appoint a representative head.
2. Gather your requirements, which include a domicile letter, a letter of reference or statement, and a letter of appointment.
3. Submit your requirements and application to BKPM to receive a temporary license called SIUP3A.
4. Obtain your local tax registration number (NPWP)
5. Receive your company registration certificate (TDP) by submitting all your requirements to the Ministry of Industry and Trade.
6. Get a permanent SIUP3A.

Competition among foreign investors is intensifying, so it is advisable to set up as soon as possible. Our company is here to provide you with all the support you need. Contact us at +6221 806 60999 to speak with one of our specialists regarding representative office registration in Indonesia.