“In contrast to PT PMA that is classified as “Usaha Besar” and must be established with a minimum investment value of more than IDR10 billion excluding land and building per business activities, Representative Office based in Indonesia does not require the founders to invest in such amount. However, the scope of the activities is limited and a Representative Office is prohibited from earning money in Indonesia.”
What Is The Difference Between PT PMA and Representative Office (RO)?
Representative Office (RO) is an office headed by an individual or more, foreigners or Indonesian citizens who are staying in Indonesia are appointed directly by the foreign company or joint venture from abroad to become their representative in Indonesia.
The most notable thing that separates PT PMA and RO is that RO is prohibited from carrying out commercial activities in Indonesia. Meaning that RO is prohibited from getting any income whatsoever, engaging in a legal contract, doing sales and purchase of goods and/or services with another company or individuals located in Indonesia. Meanwhile, the purpose of establishing a PT PMA is to invest in Indonesia which is commercial in nature. This activity is carried out by foreign investors, either fully or jointly with domestic investors.
What Scope of Business is Allowed for RO?
Investment Coordinating Board of the Republic of Indonesia Regulation Number 4 of 2021 concerning Guidelines and Service Procedures for Risk-Based Business Licensing and Investment only allows RO to do the following activities:
- Overseeing, mediator, coordinator, and tend to the company’s interest or its affiliates;
- Preparing the establishment and the development of the foreign companies in Indonesia or in other countries
What is Prohibited for RO in Indonesia?
In general, RO is prohibited from carrying out commercial activities in Indonesia with the following details:
- KPPA:
KPPA is prohibited from getting any income whatsoever, engaging in legal contracts, doing sales and purchase of goods and/or services with another company or individuals located in Indonesia. KPPA is also prohibited from intervening in any form regarding the management of a company, subsidiary, or branch that is located in Indonesia.
- KP3A:
KP3A is prohibited from carrying out trading activities and sales transactions, both from the initial stage to completion, such as submitting tenders, signing contracts, settling claims, and the like.
Documents That Need to be Prepared in The Establishment of A RO?
- Copy of Articles of Association (article of association) in English or its translation in Indonesian;
- Letter of Appointment known to the Indonesian Embassy/local Trade Attaché/local IIPC;
- Letter of Intent known to the Indonesian Embassy/local Trade Attaché/local IIPC;
- Letter of Statement from the Head of the Representative Office stating his willingness to stay and only work as the Head of the Representative Office, without carrying out other business activities in Indonesia known to the Indonesian Embassy/local Trade Attaché/local IIPC;
- Letter of Reference from the Indonesian Embassy/local Trade Attaché/local IIPC.
Types of RO in Indonesia?
- Foreign Company Representative Office (KPPA);
- Foreign Trade Company Representative Office (KP3A);
- Foreign Construction Services Business Entity (BUJKA);
- Foreign Electrical Support Services Representative Office;
- Representative Office of Foreign Oil and Gas Companies (KPPA MIGAS).
Is it Allowed for RO to Set Up Branches?
KP3A may open a Foreign Trading Company Representative Branch Office in the provincial capital and/or other regencies/cities. Branch opening can be done after the Central KP3A has a New SIUP3A Head Office. The Head of the KP3A Branch Office is different from the Head of KP3A Head Office.
Author: Belle Risca Junia and Christian Chandra
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