Establishment Representative Office (BUJKA, KPPA, KPJPTLA, KP3A)

Setting up a representative office in Indonesia is a strategic business for foreign companies looking to establish a presence without engaging in direct business activities. Additionally, establishing a representative office could be the business testing before opening a foreign direct investment company (PT PMA) in Indonesia. Representative offices can handle market research, promotion, and liaison activities.

Currently, there are three main types of representative offices as follow: BUJKA (Badan Usaha Jasa Konstruksi Asing)

● Foreign Construction Services Business Entity

● Specializes in the construction sector

● Business activities include construction consultant services or general or specialist construction work including integrated construction work through joint operations with national Construction Services Business Entities. KPJTLA (Kantor Perwakilan Jasa Penunjang Tenaga Listrik)

● Foreign Electricity Support Services companies

● Focuses on the electric support services

● Activities include consultation in the field of electric power installation, construction and installation of electrical power as well as maintenance of electrical power installation at high cost KPPA(Kantor Perwakilan Perusahaan Asing)

● General Foreign Company Representative Office

● Can operate in various sectors excluding oil, gas, and construction

● Functions include market research, promoting the parent company’s products, and establishing a local presence KP3A(Kantor Perwakilan Perusahaan Perdagangan Asing)

● Foreign Trade Company Representative Office

● Operate as a Selling Agent and Buying Agent

● Functions include market research, promoting and supervise the selling the parent company’s products, establishing a local presence and create relation and close contracts to consumers for and on behalf of the parent company for export purposes Requirements and Process: Application Submission

● Submit the necessary documentation to the relevant Indonesian authorities. Approval

● Obtain approval from the Indonesian Investment Coordinating Board (BKPM) or other relevant regulatory bodies. Establishment

● Upon approval, the representative office can commence operations, adhering to the local regulations and restrictions applicable to representative offices. Benefits:

● Facilitates entry into the Indonesian market without the need for a full-scale business operation.

● Helps in understanding the local market conditions, regulations and business environment in Indonesia.

● In-depth market research and developing products that aligns local preferences and requirements.

● Builds networks and relationships with local businesses and authorities.

● Not subjected to capital requirements, foreign capital ownership restriction and investment value requirements in Indonesia.

Establishment of Overseas Bank Representative Office
(Kantor Perwakilan dari Bank yang Berkedudukan di Luar Negeri (KPBLN))

Establishment of KPBLN in Indonesia is a business strategy that aims to expand market reach in Indonesia without having to establish a foreign direct investment company (PT PMA) which carries out banking which includes a very complex establishment process. If so, establishing a representative office could be the business testing before opening a foreign direct investment company (PT PMA) which carries out banking in Indonesia. KPBLN act as a liaison between the parent bank with their customers in Indonesia.

KPBLN Functions:
· Facilitating communication between head offices or branch offices abroad;
· Supervising credit collateral in Indonesia;
· Representing as the proxy to contact agencies or institutions for the purposes of bank parent company;
· Supervising projects funded by the bank parent company;
· Promoting KPBLN products;
· Exchanging economic and trade information, helping Indonesian exporters to access foreign markets through the KPBLN network; and
· Increasing foreign financing for priority sectors and regions in Indonesia.

Requirements and Process:
Application Submission
● Submit the necessary documentation to the Financial Services Authority / Otoritas Jasa Keuangan (OJK).


Assestment of the Chief of KPBLN
● Submit the administrative documentation of the Chief of KPBLN to the Financial Services Authority / Otoritas Jasa Keuangan (OJK).

Approval
● Obtain approval from the Financial Services Authority / Otoritas Jasa Keuangan (OJK).

Establishment
● Upon approval, the KPBLN can commence operations, adhering to the local regulations and restrictions applicable to the KPBLN.

Benefits:
● KBPN allows foreign banks to expand their market reach into Indonesia without establishing a full branch. They can conduct market research, build networks, and explore business opportunities domestically.
● Foreign banks with international clients who have interests in Indonesia can provide closer and tailored services through the KPBLN.
● Through the representative office, KPBLN can strengthen cooperation with local banks in Indonesia to facilitate more banking services, such as loans, foreign exchange trading, and other.
● Not subjected to capital requirements, foreign capital ownership restriction and investment value requirements in Indonesia.

Changing the Chief of a Representative Office in Indonesia will involve a significant process that requires adherence to specific legal and regulatory requirements. This process ensures that the new chief is formally recognized by Indonesian authorities and can effectively manage the representative office’s operations. Furthermore, Chief of a Representative Office must reside in Indonesia amd shall not be allowed to engage in any activities other than the activities of a foreign company representative as well as not holding concurrent positions as the head of a company and/or more than 1 (one) foreign company representative.


Key Steps:

Notification to Authorities:
● Notify the Indonesian Investment Coordinating Board (BKPM) or other relevant regulatory bodies about the change.
● Prepare and submit the necessary documentation, including a formal letter of notification and relevant corporate resolutions.

Documentation Requirements:
● Appointment letter or resolution from the parent company.
● Identity documents of the new chief (passport, KITAS/KITAP if applicable).
● Previous chief’s resignation letter or termination documentation.

Updating Legal and Administrative Records:
● Update the representative office’s registration details with the Ministry of Trade.
● Amend the representative office’s operational permits and licenses to reflect the change in leadership.

Bank and Tax Administration:
● Notify the company’s bank about the change in authorized signatories.
● Update the company’s tax registration details with the Directorate General of Taxes.


Benefits of Compliance:
● Ensures smooth transition of leadership.
● Maintains regulatory compliance and avoids potential legal issues.
● Enhances the representative office’s credibility and trust with local stakeholders.

Transitioning from a Representative Office to a Limited Liability Company (Perseroan Terbatas (PT)) in Indonesia is a strategic move that allows a business entity to engage in full commercial activities, including sales and revenue generation. This process requires compliance with Indonesian legal and regulatory frameworks to ensure a smooth and successful transition.

Key Steps:

Dissolution of Representative Office:
● Notify relevant authorities, such as the Indonesian Investment Coordinating Board (BKPM) and the Ministry of Trade, about the intention to dissolve the representative office.
● Submit required documentation, including a formal letter of intent and dissolution resolutions from the parent company.

Establishment of PT:
● Consultation regarding business fields and selection of the most appropriate Standard Classification of Indonesian Business Fields (KBLI) for the PT establishment.
● Consultation regarding the availability of business fields that is open to foreign investment and their limitations (if any).
● Prepare the necessary documentation for its establishment, including Articles of Association, shareholders’ agreement, and other foundational documents.
● Submit the application for the establishment of a PT to the Ministry of Law and Human Rights.
● Obtain the Deed of Establishment and approval from the Ministry of Law and Human Rights.

Capital Requirements:
● Ensure the company meets the minimum capital requirements for a PT, which vary depending on the type and scale of business.

Licensing and Permits:
● Apply for necessary business licenses and permits, such as the Business Identification Number (NIB), from the Online Single Submission (OSS) system.
● Obtain the relevant sector-specific licenses if required.

Tax Registration:
● Register the new PT with the Directorate General of Taxes to obtain a Taxpayer Identification Number (NPWP) and other necessary tax documents.

Banking and Finance:
● Open a corporate bank account in the name of the recent PT.
● Transfer any remaining funds from the representative office account to the new PT account.

Operational Transition:
● Transfer contracts, employees, and other assets from the representative office to the new PT.
● Ensure all stakeholders are informed about the change and update relevant records and databases.

Benefits of Transitioning:
● Allows full participation in commercial activities, including sales and profit generation.
● Enhances credibility and trust with local partners and customers.
● Provides opportunities for growth and expansion within the Indonesian market.

Changing the address of a Representative Office in Indonesia is a formal process that requires compliance with local regulations and proper notification to various authorities. This ensures that the new address is officially recognized, allowing the office to continue its operations without any legal issues.

Key Steps:

Notification to Authorities:
● Notify the Indonesian Investment Coordinating Board (BKPM) or other relevant regulatory bodies about the change of address.
● Prepare and submit a notification formal letter along with any required documentation.

Documentation Requirements:
● Official letter stating the change of address, signed by the authorized representative of the Representative Office .
● Updating the Representative Office documents reflecting the new address, such as the office lease agreement.
● Proof of the new address, such as a utility bill or lease agreement.

Updating Legal and Administrative Records:
● Update the R epresentative O ffice’s registration details with the Ministry of Trade and other relevant authorities.
● Amend any existing licenses and permits to reflect the new address.

Bank and Tax Administration:
● Notify the company’s bank about the change of address to update their records.
● Update the company’s tax registration details with the Directorate General of Taxes.


Operational Adjustments:
● Inform all stakeholders, including clients, suppliers, and partners, about the change of address.
● Ensure all Representative Office materials, such as business cards, website, and stationery, are updated with the new address.

Benefits of Compliance:
● Ensures seamless continuation of operations.
● Maintains regulatory compliance and avoids potential legal issues.
● Enhances the representative office’s credibility and trust with local stakeholders.

Closing a Representative Office in Indonesia involves a formal process that requires adherence to local legal and regulatory frameworks. Properly managing this process is crucial to ensure compliance with Indonesian laws and to avoid potential legal and financial repercussions.

Key Steps:

Notification to Authorities:
● Notify the Indonesian Investment Coordinating Board (BKPM) or other relevant regulatory bodies about the intention to close the Representative Office .
● Prepare and submit the required documentation, including a formal letter of intent to close the Representative Office .

Documentation Requirements:
● Formal letter of intent to close the Representative Office , signed by the authorized representative of the Representative Office .
● Resolution from board of directors on the parent company of the Representative Office approving the closure.
● Proof of tax clearance from the Directorate General of Taxes.
● Financial statements up to the closure date.

Settling Obligations:
● Ensure all outstanding obligations are settled, including employee salaries, benefits, and severance payments.
● Settle any outstanding debts with suppliers and service providers.
● Cancel office lease agreements and utility services.

Tax Clearance:
● Obtain tax clearance from the Directorate General of Taxes to ensure all tax obligations have been fulfilled.

De-registration:
● De-register the representative office with the Ministry of Trade and other relevant authorities.
● Return the original licenses and permits issued to the representative office.

Bank Account Closure:
● Close the representative office’s bank accounts after ensuring all financial transactions are completed.


Benefits of Compliance:
● Ensures a smooth and legally compliant closure process.
● Avoids potential legal and financial issues post-closure.
● Protects the parent company’s reputation and future business prospects in Indonesia.