Have you ever heard of the term KPPA? KPPA or Foreign Company Representative Office is a representative office that functions as a supervisory body, liaison, as well as a coordinator that regulates the various interests of foreign companies in Indonesia. Some examples of the presence of KPPA in Indonesia include Google LLC, a multinational company from the United States that focuses on technology such as internet services and products has opened offices in many countries, including Indonesia. Not only Google, LINE Corporation, a Japanese multinational company that provides communication and entertainment services is also located in many countries, including Indonesia. Well, to find out more about the establishment of KPPA in Indonesia along with the requirements and procedures, check out the full article below!
What is KPPA?
In accordance with Article 1 of the Investment Coordinating Board (BKPM) Regulation No. 1 of 2020, KPPA is an office led by individuals, both Indonesian citizens and foreigners appointed by foreign companies or a combination of foreign companies abroad as their representatives in Indonesia. Yes, in other words, KPPA is the office of a foreign company in carrying out activities in Indonesia. The purpose is as a representative of its parent company from abroad, taking care of the company’s interests, and preparing for the establishment and development of PT Penanaman Modal Asing (PT PMA) companies, without being allowed to conduct business activities. KPPA can also be established by any foreign company, but of course it has fulfilled the government’s provisions. In the representative office, not only foreign nationals are employed, but Indonesian citizens can also work there. Indeed, there are advantages when foreign companies open representative offices in Indonesia, one of which can increase employment.
KPPA Activity Limitation
Based on Article 4 of BKPM Regulation No. 1 of 2020, when located in Indonesia, KPPA’s activities are limited to:
- As a supervisor, liaison, coordinator, and taking care of the interests of the company or its affiliated companies;
- Prepare for the establishment and development of PT PMA in Indonesia;
- Not seeking any income from sources in Indonesia, including not being allowed to carry out activities or conduct any commercial sales and purchase of goods or services with companies or individuals in the country;
- Not participate in any form in the management of a company, subsidiary, or branch company in Indonesia; and
- Located in an office building in the provincial capital.
Requirements for Establishing KPPA in Indonesia
The establishment of KPPA can be done by fulfilling the following requirements:
- The office is led by one or more foreigners or Indonesian citizens who act as office managers based on a letter of appointment made by the company.
- The activities of the office are limited to its role as administrator, liaison, coordinator, and taking care of the interests of the company or its affiliated companies in Indonesia.
- Office manager residing in Indonesia
- The location of the KPPA must be in an office building that has been available
What is the Procedure for Establishing KPPA in Indonesia?
To establish a KPPA, a license application is submitted to the Head of BKPM. The procedures that must be followed are as follows: 1. Registration is submitted to BKPM by filling out the KPPA model. At this stage, prepare supporting documents as attachments:
- Articles of Association of the foreign company to be represented
- Letter of appointment from the represented foreign company
- Copy of passport for foreigners and/or copy of ID card for Indonesian citizens.
- Declaration of willingness to live and work as a Representative Executive, and not to engage in any other business.
- Power of attorney if the application is not submitted by company management
2. Then, the KPPA license is issued and signed by the Head of BKPM or a designated official, with a copy to:
- Minister of Finance
- Minister of Labor and Transmigration
- Chief Representative of Indonesia in the company’s home country
- Governor/Regent/Mayor
3. After obtaining the approval permit, the company must immediately report to PTSP-PDPPM to obtain direction and guidance in completing the regional licensing, no later than three months after the Approval Letter is issued. The license includes:
- Certificate of Company Domicile
- TIN
- Taxable Confirmation Letter
- Company Registration Certificate
- And other necessary licenses
Not only taking care of licensing and establishing representative offices in Indonesia, KPPA is also required to report activities to BKPM which are submitted online every six months through the OSS system. Thus the explanation of the establishment of KPPA in Indonesia, along with the requirements and procedures. Keep in mind that KPPA functions in preparing the establishment of a PT PMA.
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So, when you have successfully obtained a KPPA establishment permit, you can then establish a PT PMA to carry out business activities and foreign investment in Indonesia. To find out more about PT PMA, you can visit this page. Or are you still confused about the establishment of KPPA in Indonesia? Consult with Kontrak Hukum by contacting us at Tanya KH or via Direct Message (DM) to Instagram @kontrakhukum.
