Entering the Bali market might be challenging, considering the complexity of the regulations and culture. However, the government has offered business actors the opportunity to get into the market as easily as possible to establish their presence in the market. One of the most popular entry strategies is establishing a representative office.
What is the Representative Office?
A representative office (RO) is an office incorporated by an overseas company to represent themselves in Indonesia. The representative office is not required to have capital injection; this type of office is the best option if you want to do market research, look for a tender, or maintain a relationship with your agent. A representative office is led by the Chief of Representative Office (CRO), who must reside in Indonesia. The CRO cannot hold a concurrent position as head of a company and/or for another representative office. Additionally, if the CRO is a foreigner, it is compulsory to obtain a working permit as well.
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Type of Representative Office in Indonesia
Representative offices regulated under Government Regulation No. 5 the Year 2021 and BKPM Regulation No. 4 in the Year 2021 are as follow:
- Foreign Representative Office (Kantor Perwakilan Perusahaan Asing/KPPA);
- Foreign Trading Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing/KP3A);
- Representative Office of Foreign Construction Services Business Entity (Kantor Perwakilan Badan Usaha Jasa Konstruksi Asing /BUJKA);
- Representative Office of Foreign Electricity Supporting Services (Kantor Perwakilan Jasa Penunjang Tenaga Listrik Asing /JPTLA).
Foreign Representative Office (KPPA)
Opening a representative office in Bali, specifically a KPPA, is a suitable option for companies wishing to conduct market research or feasibility studies in Indonesia.
The limitation of the Representative Office is as follows:
- Acting as a supervisor, liaison, and coordinator to take care of the interests of the company.
- Preparing for the establishment of PT PMA
- Not generating revenue, including prohibition from engaging in selling and purchasing transactions for commercial goods and services with local companies or individuals.
- It needs to be located in the building of the capital city of the province.
Foreign Trading Representatives Office (KP3A)
If your parent company is a trading company, such as a distributor or an e-commerce business, setting up a representative office in Bali under KP3A is a good option.
KP3A is mandatory to obtain a business registry number (NIB) and a business license (SIUP3A). The KP3A can be located in the capital city of a province and any district or regency within Indonesia.
KP3A is not allowed to participate in selling transactions from the beginning, such as signing a contract, sending invoices, and settling claims.
Obligations that KP3A must follow:
- KP3A business activities must be carried out by a national trading company or foreign-owned company that has an Import License (API-U).
- KP3A must appoint a national company as an agent for the promoted goods;
- KP3A and its branch offices must have a SIUP3A;
Foreign Construction Representative Office (BUJKA)
Government Regulation No. 5 Year 2021 allows the Representative Office of a Foreign Construction Service Business Entity (BUJKA), a legal entity from abroad, to establish an office in Indonesia for construction business.
BUJKA may provide construction consultancy services, construction works, and integrated construction projects, but requires extensive qualifications.
Furthermore, consultation services and construction works are divided into 2 classifications, as follows:
| Classification | Construction Consultancy Service | Construction Works | Integrated Construction Works |
| General |
|
|
|
| Specialized |
|
|
Similar to a construction company, BUJKA must obtain a business registry (NIB) and its own business license. Additionally, BUJKA must secure a certification in the form of a Business Entity Certificate (SBU) to serve as its commercial license.
Once the BUJKA is completed and is going to perform a project, it needs to form a Joint Operation with a local construction company.
Representative Office of Foreign Electricity Support Service Companies (JPTLA)
According to Government Regulation No. 25 Year 2021 (GR 25/2021), JPTLA operates as a private business entity engaged in electricity supporting services. To conduct its electric power support services business, JPTLA must obtain a business license and a Business Entity Certificate (SBU JPTLA).
The business licensing for JPTLA will be issued to the following categories of businesses:
- Consultation services related to electricity installation;
- Construction and establishment of electricity installations; and
- Maintenance services for electricity installations.
JPTLA may only be permitted to carry out high-cost electricity supporting services works with the following threshold:
- Construction and electricity installation setting, at least IDR 100 billion;
- Consultation in the field of electricity installation or maintenance of electricity installation, at least IDR 10 billion.
Also read: Should You Use a Nominee for Your Company in Indonesia?
Pros and Cons of a Representative Office
Pros
- 100% foreign owned
- No capital investment
- Can sponsoring visa
Cons
- Not allowed to generate revenue
- Limit to only hiring a maximum of 2 foreigners.
How to apply for a Representative Office in Bali
In general, to get a business license for a representative office in Indonesia, including Bali, you must apply through the Online Single Submission (OSS) system. What you have to prepare before the application is the following:
- Letter of intent legalized by a notary and the Indonesian Embassy located in the parent company’s country of origin;
- Letter of Appointment by the Indonesian Embassy located in the parent company’s country of origin;
- Letter or Statement of the CRO that will not engage in any commercial activity
- Reference letter from the Indonesia Investment Board in the country of origin
- Article of Association legalized by a notary and the Indonesian Embassy located in the country of origin
- A copy of a valid passport (for foreigners) or a copy of the identification card number (for Indonesians) is required for those proposed as a Representative Office Executive.
Additionally, you must provide more documentation to apply for a Business Entity Certificate (SBU) for BUJKA and JPTLA.
For more detailed information and understanding of which one is the best for your business, our consultants at ILA will be happy to discuss further.
Also read: Guide to Check Company Profile Information in Indonesia
