A foreign company may establish a representative office in Indonesia in one of the province capitals.
However this entity I restricted and only permitted to
1) Conduct Promotional Activities
2) Engage in market research
3) Act as an agent for the parent company.
This form of business entity does not allow you to generate revenues and or do business directly under the name of the representative office.
To open a representative office, you should have an existing parent company overseas to manage the representative office in Indonesia.
Some foreign investors prefer to set up a representative office first to grow the market in Indonesia before establishing a PT. PMA.
There are various advantages and disadvantages of opening a representative office in Indonesia.
- It is relatively easy and quick to set up
- No need for large investments or paid up capital
- Less paperwork; you only need to report income tax for the employees as well as (rented) office space tax
- You are not allowed to generate revenues, profit or engage in sales directly
Type of Representative Office
There are 4 options to consider:
- Foreign Representative office
- Foreign Trade Representative office
- Foreign Construction Representative office
- Foreign Bank Representative office
While the first two options are used by vast majority of the companies, we also provide information about Foreign Construction Representative Office. The Foreign Bank Representative Office is a very rarely selected option.
From a legal point of view, it is relatively simple to establish such a presence in Indonesia.
You must submit an application to the Indonesian Investment Coordinating Board (BKPM).
This can be done either by the director or manager of the foreign company, or by the director candidate in Indonesia on behalf of the foreign company of the new representative office, who must be appointed prior to establishing a presence in Indonesia.
Another option could be a power of attorney. This process may look simple, but there are several steps considered to be a part of the application that will certainly take you some time.
After all of the paperwork is complete, BKPM will issue the license, usually within one month.
The license is valid for three years and could be extended for a maximum of two years.
With the new regulation BKPM 12/2013, there are no limitations on extension of the license.