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Foreign-owned Company (PT PMA) vs Representative Office (KPPA/KP3A)

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          Commonly misinterpreted and overlapping their own details, Foreign-Owned Company and Representative Office might confuse the business owners to start their activities in Indonesia. This might help you give better insights on what to expect when you pick one of the available options for setting up a new business in the country.

        General Overview : Company

        Based on Indonesia regulated law, the recognized legal entities in Indonesia are determined in 3 (three) forms : Limited Liability Company (Perseroan Terbatas / PT), Cooperative / Union (Koperasi), and Foundation (Yayasan). Though, each entity have their own types and variations; the most well-known and variative is the Limited Liability Company (Perseroan Terbatas / PT).  Known internationally as one of the most famous business/legal entities, the Limited Liability Company in Indonesia is under the regulated Company Law of Law No. 40 year 2007. Several of its types are : Local Company (Perseroan Terbatas Lokal / PT Lokal), Foreign-Owned Company (Perseroan Penanaman Modal Asing / PT PMA), and Publicly Listed Company (Perseroan Terbatas Terbuka / PT Tbk.). Surely, the difference between Local and Foreign-Owned Company is on the ownership of shares.

        However, due to the regulations and various investment law, setting up a Foreign-Owned Company in Indonesia might be a hassle to those new to Indonesian market. This is where Representative Office comes into rescue. Serving the role of its own name, a Representative Office is an office of representative presence from the foreign principal companies overseas. 

        General Overview : Representative Office

        Having different form than the Limited Liability Company, a Representative Office (Kantor Perwakilan Perusahaan Asing / KPPA) is more suitable for an initial step of establishing your business. If you have a fully established business overseas, with the status similar to the definitions of Indonesia’s Company, then your business can enter the Indonesian market in the form of Representative Office. While Company is a more “free to roam” legal entity, a Representative Office is limited to market research and support activities to the foreign principal companies overseas.

          Roles : What are the differences?

         Limited Liability Company is allowed to perform its intended business activities, with having (at least) one Director, one Commissioner and two Shareholders upon establishment. The requirements may vary depending on the business activities. Whereas Representative Office is only required to have one Chief of Representative Office (whose role does not overlap with the Directorial-level position in the principal foreign company overseas). The Representative Office, unlike a Limited Liability Company, is unable to perform any profit-related activities. Its ability is limited to only supervise, research, coordinate and support the principal foreign company.

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Find below the summary of differences between the Foreign-Owned Company and Representative Office

General Summary on the Differences between Foreign-Owned Company & Representative Office

DETAILS Foreign-Owned Company (PT PMA) (RO)

Representative Office & Trade Representative Office

(KPPA & KP3A)
Definition Most common legal entity for foreign investors to carry out foreign investment business in Indonesia; with foreign shareholders and may (/not) be required to have local shareholders in accordance with the governed law
  • Representative Office established by foreign domiciled companies in Indonesia. Difference between RO and Trade RO is on the business activities performed by the foreign principal company.  Limited roles to act as supervisor, liaison, coordinator, and researcher of the business industry in Indonesia
Qualifications on Investment Required to have Authorized Capital in accordance with the regulated governed law on foreign investment and at the very least 2 shareholders.
  • Not allowed to acquire profits under its own name, all financial-related activities must be referred back to the origin company.

KPPA/KP3A is not required to have capital to set up the KPPA/KP3A, so they do not need to have shareholders.
The Management Board and Technical Role in the company Required to have (at minimum) 1 Director, 1 Commissioner and 2 Shareholders. If Directors of foreign nationality, entitled to apply for Non-Permanent Stay Permit / KITAS. Required to have 1 appointed Chief of RO (may be foreign or local)
Operating Licenses
  • Will be processed in accordance with the Business activities of the Company
 Business License is the proof or Registration of Representative Office in Indonesia
Benefits
  • Able to be established in all Indonesia territory.
  • Able to generate income, including sales and purchase of goods and services.
  • Able to hire foreign workers.
  • Less restrictions in regards of the business activities, i.e., export-import.
  • Able to join national tenders in accordance to the stipulated law.
  • No capital requirement
  • RO is able to assist the represented Company in Indonesia in terms of sales and promotional activities.
  • Able to conduct market research and promotional activities.
  • Able to hire foreign worker (as Chief Rep.)
  • Recognized roles are not as many as Company.
  • Establishment of RO has less hassle and difficulties if all required documents are in accordance

Reach our Legal Expertise Team for further FAQ and we will provide the best solution to suffice your Investment needs!

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