KP3A in the Sector of Trade Through Electronic Systems or PMSE

“According to BKPM Regulation No. 4/2021, there are several types of representative offices, including those for foreign trading companies, construction service businesses, and electrical power support services. In addition to that, Ministry of Trade Regulation No. 31 of 2023 also introduces a new type of representative office, namely the Representative Office of Foreign Trade Companies in the Field of Trade Through Electronic Systems, or KP3A in the PMSE Sector.”   

Overview

A representative office is a representation of a foreign company in Indonesia. As a representative, all operational activities are carried out on behalf of the principal company abroad. A representative office is not a legal entity and therefore cannot hold rights and obligations of its own.

KP3A in the PMSE Sector

KP3A in the Trade Through Electronic (PMSE) Sector, based on its definition in MoT Regulation 31/2023, is an office led by one or more individuals who are either Indonesian citizens (WNI) or foreign citizens (WNA) appointed by the foreign PPMSE as their representative in Indonesia. Foreign PPMSEs that meet certain criteria are required to appoint a KP3A in the PMSE Sector to act on behalf of the foreign PPMSE. The specific criteria for a foreign PPMSE include:

1. has conducted transactions with at least 1,000 (one thousand) consumers within a period of 1 (one) year;
2. has delivered at least 1,000 (one thousand) packages to consumers within a period of 1 (one) year; and/or
3. has had traffic or access of at least 1% (one percent) of domestic internet users within a period of 1 (one) year.

KP3A in the PMSE Sector is prohibited from representing more than one foreign PPMSE. If necessary, KP3A in the PMSE Sector may open a branch office after obtaining approval from the foreign PPMSE it represents.

In carrying out its activities, KP3A in the PMSE Sector must have a SIUP3A in the PMSE Sector, which is applied for through the OSS system. SIUP3A in the PMSE Sector shall be used by the KP3A in the PMSE Sector to act as and on behalf of the foreign PPMSE in relation to consumer protection interests, development to increase the competitiveness of domestic products, and dispute settlement. SIUP3A is valid as long as the KP3A in the PMSE Sector continues to conduct its business and/or activities as a representative. To obtain the SIUP3A, an application must be submitted by fulfilling the following requirements:

1. proof of appointment of KP3A in the PMSE Sector as a representative by a foreign PPMSE, which has been legalized by:
   • the competent authority for countries participating in the Convention on the Abolition of Legalization Requirements for Foreign Public Documents; or
   • representative officials of the Republic of Indonesia in the country of origin for countries not participating in the Convention on the Abolition of Legalization Requirements for Foreign Public Documents;
2. a statement letter from the Trade Attaché of the Republic of Indonesia or an official of a representative office of the Republic of Indonesia in a foreign PPMSE country;
3. recordation of articles of association/incorporation of the foreign PPMSE;
4. proof of the identity of the management of KP3A in the PMSE Sector, evidenced by a residence identity for Indonesian citizens and a passport for foreign citizens;
5. a statement letter of the number of workers employed, completed with records of identity and work statement letter;
6. Electronic System organizer registration certificate issued by the authorized agency;
7. website address and/or application name of the foreign PPMSE that is being represented; and
8. screenshot of the contact number and/or electronic mail address of the consumer complaint service from the foreign PPMSE represented and the consumer complaint service contact of the Directorate-General of Consumer Protection and Orderly Commerce.

The proof of appointment and recordation of the Articles of Association must be translated into the Indonesian language by a sworn translator. The proof of appointment letter must at least contain the authority of the KP3A in the PMSE Sector to represent the foreign PPMSE in:

1. fulfilling consumer protection obligations;
2. conducting training to increase the competitiveness of domestic products; and
3. dispute settlement.

Representative Office Restrictions

According to Article 16 paragraph (3) of BKPM Regulation No. 4/2021, there are several restrictions for foreign representative offices, including:

1. They may only act as supervisors, liaisons, coordinators, and manage the interests of the company or its affiliated companies;
2. To prepare for the establishment and development of a foreign investment company (PMA) business in Indonesia or in other countries and Indonesia;
3. They must be located in office buildings in the provincial capital;
4. They cannot seek income from sources in Indonesia, including not being allowed to carry out activities or engage in any sales and purchase transactions of commercial goods or services with companies or individuals within the country; and
5. They may not participate in any form in the management of a company, subsidiary, or branch office that exists in Indonesia.

Benefits of Having Representative Office

Having a representative office offers several benefits. Primarily, it serves as a critical hub for supervision, liaison, and coordination, managing the interests of the principal company or its affiliates. This presence facilitates smoother communication and oversight within the Indonesian market. Additionally, representative offices are instrumental in preparing for the establishment and development of foreign investment company  businesses Indonesia. By conducting essential market research before establishing a foreign direct investment, these offices help companies make informed decisions, which is crucial given the significant capital required for such investments. Although they are restricted from seeking income from Indonesian sources and engaging in commercial transactions, representative offices still provide significant value by enabling foreign companies to navigate the local market landscape, establish connections, and lay the groundwork for future business ventures.

Representative Office Organizational Structure

In essence, there is no definite organizational structure for a Representative Office like that of a Limited Liability Company, which is required to have a Chief of Representative Office appointed by the Principal Company. According to BKPM Regulation No. 4/2021, the Chief of Representative of a Foreign Representative Office must reside in Indonesia and is not allowed to engage in activities outside the representative office’s scope. The Chief of Representative is also not permitted to hold a position as the Head of a company and/or more than one foreign company representative office. The Chief of Representative shall ensure the Representative Office compliance to the relevant laws and regulation. In the event that the Chief of the Representative office is a foreign national or employs foreign workers, they must ensure compliance with regulations related to the use of Indonesian labour.

Author: Daffa Zidan

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