4 (FOUR) THINGS YOU SHOULD KNOW ABOUT REPRESENTATIVE OFFICE OF FOREIGN COMPANY (KPPA) IN INDONESIA

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4 (FOUR) THINGS YOU SHOULD KNOW ABOUT REPRESENTATIVE OFFICE OF FOREIGN COMPANY (KPPA) IN INDONESIA

4-(FOUR)-THINGS-YOU-SHOULD-KNOW-ABOUT-REPRESENTATIVE-OFFICE-OF-FOREIGN-COMPANY-KPPA-IN-INDONESIA

As we explained in our previous SMART Article regarding the Representative Office, there are three (3) types of representative office in Indonesia based on Article 21 Regulation of Head of Investment Coordinating Board (Badan Koordinasi Penanaman Modal/BKPM) Number 15 of 2015 Concerning Guideline and Procedure for Licensing and Non-Licensing Investment (“BKPM Regulation No.15/2015”), as follows:

  1. Representative Office of Foreign Company (KPPA);
  2. Representative Office of Foreign Trade Company (KP3A); and
  3. Representative Office of Foreign Construction Services Enterprises (BUJKA).

In this article, we will specifically discuss about the Representative Offices of Foreign Company (Kantor Perwakilan Perusahaan Asing/KPPA). As for two others will be explored in separate articles.

  1. KPPA BACKGROUND
  2. We understand that KPPA is an office which is lead by one or more foreigner or Indonesian citizen who are appointed by the foreign company or joint foreign company overseas as its representative (chief of Representative) in Indonesia (Article 1 paragraph 28 BKPM Regulation No.15/2015).

    Further, KPPA’s have a limited activities (please see below for further explanations), and to able to operate in Indonesia KPPA should have a licenses issued by BKPM, which will be processed approximately 10-14 Working Days after the documents completed and received by BKPM.

  3. TERM OF KPPA
  4. Indonesia laws and regulations only allowed KPPA can be operated for 5 (five) years with 3 (three) years for the beginning when the KPPA License issued and can be extended for twice, once for a year.

    KPPA have 2 (two) options, after 5 (five) years operating in Indonesia, as follows:

    1. Applying for an extension with different activities with the previous KPPA License; or
    2. Setting up Foreign Direct Investment (Penanaman Modal Asing/PMA) Company in Indonesia.
  5. PERMISSIBLE ACTIVITIES FOR KP3A 
  6. Please be noted that the Representative Office activities are limited with the following general limitations:

    1. Taking care of the company interests or its affiliated companies.
    2. KPPA will not allow seeking income from Indonesian source include not justified implementing activities or doing something such as contract/sale transaction and purchase of goods or services with companies or individuals in the Indonesia territory.

    3. Preparing for the establishment and development of the business of Foreign Investment in Indonesia.
    4. KPPA only had a role as supervisor, coordinator, and managing the interest of the company or its affiliated overseas companiesin Indonesia. Therefore, KPPAs’ will not participate in any form of the management of companies, subsidiaries or branches of companies in Indonesia.

    5. Locating in the provincial capital and must be located in an office building.
    6. KPPA will not allow using Virtual Office as a company address in Indonesia. However, practically KPPA using Serviced Office as a company address rather than lease a conventional office which will be costly.

  7. SANCTIONS
  8. In accordance with the Article 29 Regulation of the Head of the Indonesian Investment Coordinating Board Number 17 of 2015 concerning Guidelines and Procedures Investment Implementation Control, KPPA may get the following sanctions from BKPM if conducting exceeds or not comply with the abovementioned:

    1. Written warning and/or online warning;
    2. Restriction of business activities;
    3. Suspension of business and/or facilities of investment; or
    4. Cancellation / Revocation of Licensing Investment and/or business and/or facilities Investment.

HOW CAN SMART CONSULTING HELP YOU?
To ensure a smooth investment and business operation from the legal perspective, but also still focus on maintaining your business in Indonesia and reach your revenue target, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with prevailing laws and regulations.

SMART Consulting is an Indonesian Corporate Legal Services firm. SMART has assisted Clients in dealing with matters related to Investment Law, such as assist Client to establish many types of Representative Office in Indonesia. We also assist Clients regarding the Compliance and Corporate Legal Services.

Contact Us Now to get your legal solution for your business goals, and still comply with the prevailing laws and regulations.
E: info@smartcolaw.com
H: +62821-1234-1235
O: +6221-80674920

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