Do and Don’t of Foreign Company Representative Office in Indonesia

“A Foreign Company Representative Office is an office headed by a foreign nationals or Indonesian citizens appointed by a principle company. The Representative Office is regulated under Indonesia Investment Coordinating Board Regulation (Peraturan Badan Koordinator Penanaman Modal – Peraturan BKPM) Number 6 of 2018 on Guidelines and Procedures of License and Investment Facilities on Part One of Chapter V concerning Provisions and Procedures of Representative Office and Branch Office Permits and Indonesia Investment Coordinating Board Regulation Number 7 of 2018 on Guidelines and Procedures for Capital Investment Implementation Monitoring”

I.Authority of Foreign Company Representative Offices in Indonesia:

a.Manage the interests of the company or its affiliated company;

b.Preparing the establishment and business development of foreign investment companies in Indonesia or in other countries;

c.Carry out activities to introduce, promote and promote the marketing of goods produced by foreign companies or a combination of foreign companies abroad who designate them, and provide information or instructions for the use and importation of goods to domestic companies/users;

d.Conduct market research and supervision of domestic sales in the context of marketing goods from foreign companies or a combination of foreign companies abroad who designate them;

e.Conduct market research on goods needed by foreign companies or a combination of foreign companies that designate and provide information and instructions on goods exportation requirements to domestic companies;

f.Report its activities to Indonesia Investment Coordinating Board every 6 (six) months using the format that is given by Indonesia Investment Coordinating Board;

g.Terminate the contract for and on behalf of the company that appoints it to a domestic company in the context of export.

II.Important Provisions that cannot be Violated by Representative Office in Indonesia:

a.Foreign Company Representative Office should be located in an office building in the provincial capital;

b.Office activities are limited to their role as supervisors, liaisons, coordinators, and take care of the interests of companies or affiliated companies in Indonesia and/ or countries outside Indonesia;

c.Foreign Company Representative Office cannot gain for an income from sources in Indonesia, including not being allowed to carry out activities or do something related to the sale/ purchase transaction of goods or services with companies or individuals in Indonesia;

d.Foreign Company Representative Office cannot participate in any form in the management of any company, subsidiary company or branch office in Indonesia;

e.Office Managers must reside in Indonesia and take full responsibility for the operational of the Office;

f.Foreign Company Representative Office must submit Annual Report every year;

g.Improve the competence of Indonesian citizens through work training;

h.The Head of Foreign Company Representative Office should stay in Indonesia and fully responsible for running the Office, and is not allowed to engage in activities other than The Representative Office’s activities, also does not hold concurrent positions as Corporate Leaders in more than one office.

III.Sanctions for The Representative Office which violates the provisions of Law:

According to the Article 34 of Indonesia Investment Coordinating Board Number 7 of 2018 on Guidelines and Procedures for Capital Investment Implementation Monitoring, Foreign Company Representative Office can be punished with administrative punishments if there is any report from the Authorized Technical Institution and/or related institution regarding the violation of law by the Representative Office.

The administrative punishment that can be given to the Representative Office according to the Article 34 is a warning (First and Last Warning). Moreover, if the Investor does not give any responses upon the warning within 30 calendar days, the Authorized Institution can revoke the Investor’s permit. Besides, according to Article 32, Indonesia Investment Coordinating Board has also authority to block the Access Rights for the Investors.

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