There are three legal entity types for foreing companies in Indonesia – limited liability company (PT PMA), general representative office (KPPA) and representative office of foreign trade company (K3PA).
In this article we go over the key aspects of representative office of foreign trade company – what is it and when to choose that as your legal entity type.
Differences between general and trade representative office
There are several key aspects to consider when deciding which representative office type to choose:
Business activities of the parent company. K3PA can be opened only if the parent company is the principal of products that are going to be promoted in Indonesia. Broker companies are not allowed to open K3PA in Indonesia.
License validity period. General representative office license is issued for 5 years but trade representative office license is issued for three years and it can be extended perpetually.
Location in Indonesia. General representative office can only be opened in the capital cities of provinces in Indonesia. K3PA can be opened in any location.
Preparations for opening trade representative office
- Appoint one person as Chief Representative Officer in Indonesia. This person can be either Indonesian or foreign national. In the latter case the person must acquire personal domicile letter from the building he is staying. After temporary license is issued, work permit should be applied for immediately.
- Rent an office.
- Gather legal documents (Indosight will prepare them for our clients):
- Letter of Appointment
- Letter of Intent
- Letter of Statement
The entire process is as following:
Compliance after K3PA is established
Tax reporting. Even though representative office is not allowed to earn revenue and thus cannot report income tax, it still needs to report monthly withholding tax. Most of the withholding tax will be paid on employee salaries, renting office and other administrative expenses.
Activity report. Once a year K3PA needs to submit activity report to BKPM. This is also basis for the extension of the representative office license.
BPJS (Institution of Social Security For Manpower) registration. This is required if you have more than 10 employees but it also makes the hiring of local employees easier.
All of the above can be handled by Indosight’s consultants.