“Article 22 (3) of BKPM Regulation No. 15 of 2015 also stated, Representative Office that appointing Chief of Representative who is a foreigner and/or employ expatriates, shall hire Indonesian workers in accordance with the Laws of the Republic of Indonesia.”
When a foreigner or foreign company wants to expand their business and network, explore business opportunities or provide other managerial support in Indonesia to the parent company abroad, they may to choose to establish a Representative Office of Foreign Company. Here in Indonesia we called it as Kantor Perwakilan Perusahaan Asing, or KPPA). According to the Article 1 No. 28 of BKPM Regulation No. 15 of 2015 on Guideline and Procedure of Investment Licensing and Non-Licensing,
“Representative Office of Foreign Company, hereinafter referred to as KPPA, is an office headed by one or more foreign citizens or Indonesian citizens appointed by foreign companies or foreign joint-ventures overseas as their representatives in Indonesia.”
There are some activities that representative office can do, such as:
- Act as supervisor, liaises between the foreign parent company and its branches in Indonesia, coordinator, and manage all of company and its branches’ interests.
- Market research for material and product based on company requirements.
- Supervised company sales in Indonesia for marketing activity.
Based on the Article 22 (1) of BKPM Regulation No. 15 of 2015, the activities of a representative office are limited to:
- Taking care of the interests of the foreign parent company or its affiliated companies
- Preparing the establishment and development of a foreign investment company in Indonesia
- Representative office must be located in the capital city and inside of an office building. (You cannot open the representative office in a house or apartment).
It needs to be emphasized that KPPA is strictly forbidden from engaging in commercial activities and generate revenue/profit. If foreign investors want to open a foreign investment company, they often started by open a representative office in Indonesia first in order to “get to know the market” and if their findings are positive, then they will open a foreign investment company.
According to the Article 30 (1) of BKPM Regulation No. 15 of 2015, a foreign investment company and representative office are allowed to employ foreign workers. In order to employ foreign workers or expatriates, the foreign investment company and representative office must have the expatriate working permits, which is:
- Expatriate Manpower Utilization Plan or RPTKA
- Work Permit or IMTA
Article 22 (3) of BKPM Regulation No. 15 of 2015 also stated, Representative Office that appointing Chief of Representative who is a foreigner and/or employ expatriates, shall hire Indonesian workers in accordance with the Laws of the Republic of Indonesia.
Decree of Ministry of Manpower and Transmigration No. 464 Year 2012 stated that the positions are eligible for Representative Office are limited only for Chief of Representative and Assistant to Chief Representative.
All of the representative office that wants to employ foreign workers have to make sure that they are ready to come to Indonesia by having Work Visa issued by Representative Office of the Republic of Indonesia abroad. Requests for permit for foreign workers shall be submitted online to the central PTSP in BKPM, Provincial BPMPTSP, Regency / Municipal BPMPTSP, PTSP KPBPB or PTSP KEK in accordance with their authority.
How can ELSON help you?
ELSON Indonesia is a company that focus on providing comprehensive legal solution for expatriates, foreigner, and mixed marriage couple in Indonesia.
Phone: 0819 3274 1 333
Author: Windi Saptarini