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A Foreign Representative Office (Kantor Perwakilan Perusahaan Asing [KPPA]) is a more general form of representative office than the foreign trade representative office and the foreign construction services representative office as we covered in previous columns. The Foreign Representative Office is regulated by BKPM, whereas the aforementioned representative offices are regulated by respectively the ministry of trade and the ministry of public works. Due to the general nature of a Foreign Representative Office, it is typically set up to provide managerial support to the parent company abroad.
Allowed activities Foreign Representative Office
According to article 68 (2) of BKPM regulation 5 of 2013 (BKPM 5 of 2013), the activities of a Foreign Representative Office are limited to:
taking care of the interests of the company abroad or its affiliated companies; and/or
preparing the establishment and development of a foreign investment company (PT PMA) in Indonesia.
To carry out above-mentioned activities, the same paragraph requires that the Foreign Representative Office is located in an office building in a provincial capital city in Indonesia.
Based on article 4 (3) of BKPM regulation 22/SK/2001 (BKPM 22 of 2001), the chief representative of the Foreign Representative Office is allowed to employ foreign employees that have relevant expertise.
Restricted activities Foreign Representative Office
Since the role of the Foreign Representative Office is limited to the activities as explained in the paragraph above, it cannot conduct activities outside this scope of work. Article 2 BKPM 22 of 2001 explicitly regulates that the Foreign Representative Office cannot:
look for income from sources inside Indonesia, including carrying out activities or doing anything related to the engagement in and/or sales and purchases of goods or services with a company or individual inside Indonesia; and/or
participate in any form in the management of a company, a subsidiary or branch office in Indonesia.
Time restrictions Foreign Representative Office
In order to carry out business activities in Indonesia, the Foreign Representative Office must have a KPPA Activities License. The validity period of such license is maximum 3 (three) years and may be extended two times, each for a period of 1 year, based on article 68 (4) BKPM 5 of 2013. After a period of 5 years, the Foreign Representative Office may be granted an extension of time again provided that its activities are different with the activities of the previous period.
This column is provided by PNB Law Firm