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What is a representative office?
First of all, there are two types of representative offices in Indonesia – a general representative office (Kantor Perwakilan Perusahaan Asing – KPPA) and representative office for trading (SIUP3A). In the context of this article we talk about the former.
Representative office is defined as an office set up by a foreign company or company located outside of Indonesia in order to take care of its business interest in Indonesia. This can also involve the preparations for establishing a foreign owned company in the future.
Roles and limitations of a representative office
Office activities are limited to its role as a supervisor, liaison, coordinator and representative of the interest of the parent company
Office is not allowed to generate income, all transactions will be handled by the parent company
Benefits of representative office
As you could see from the role of representative office, it is not a substitute to opening a limited liability company (PT PMA) as it won’t be able to act as a separate entity. However, there are several reasons why many foreign companies choose a representative office over PT PMA.
1. No capital requirement
Foreign owned companies are required to have investment plans for at least US$1.2 million and paid up capital of US$300,000. This is not a small amount and in many cases the investors want to test the market first before making such capital commitments.
As representative office you won’t have any capital and therefore the capital requirements don’t apply. For some investors it also means that they won’t have to play with the minimum capital and do everything by the law.
2. Handle the sales and delivery
As a representative office you are still allowed to do the sales and delivery of your products/services. The restriction is that you need to charge your clients from your parent company. In many cases your Indonesian clients will accept it and you can delay opening a PT PMA until you have gained a strong client portfolio.
3. You are still entitled to non-permanent stay permit (KITAS)
Just like a PT PMA, representative office can apply non-permanent stay permits (KITAS) to its foreign experts. You will be able to legally stay and work in Indonesia.
Contact us
If you have further queries, please contact Tannet
24 hours Malaysia hotline：603-21418908;
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