“Representative Office obliged to submit the activity report to the BKPM.”
In Indonesia, the term representative office refers to an office lead by a chief of representative appointed by a foreign company outside of Indonesia as its representative in Indonesia, however in details it is actually further divided into four, which are General Representative Office / KPPA (Kantor Perwakilan Perusahaan Asing), Trade Representative Office / KP3A (Kantor Perwakilan Perdagangan Asing), Construction Representative Office / BUJKA (Badan Usaha Jasa Konstruksi Asing), and Oil and Gas Representative Office / KPA MIGAS (Foreign Representative Office Oil and Gas Sub-Sector). Each representative office is regulated under different regulations and authorities, and each has different legal compliance as well.
General Representative Office
General Representative Office or KPPA is regulated under the Indonesian Investment Coordinating Board (BKPM) Regulation No. 5 of 2019 jo. BKPM Regulation No. 6 of 2018 on Guide and Procedures on Investment Licensing and Facilities. As of right now, the licensing for KPPA is still processed at BKPM’s system, National Single Window for Investment or also known as NSWI, however, it is planned to move the licensing to OSS. The requirements for the acquirement of KPPA license are:
a) Article of association;
b) Letter of appointment (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
c) Letter of intent (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
d) Letter of the statement (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
e) Letter of reference; and
f) Id and photo of the chief of representative.
The applicant can simply submit their application and required documents to NSWI system, and BKPM will issue the KPPA license in a day after they received complete requirements. The license itself will remain valid as long as the KPPA is still operating in Indonesia. However, the post establishment of the Representative Office, there is still a legal compliance requirement related to the activity report. In essence, BKPM is obligated to supervise foreign investment in Indonesia, which for the business entity is done via investment report (LKPM). However, as the representative office is not meant to run a business, it’s supervised via activity report instead of an investment report. According to BKPM Regulation No. 7 of 2018 on Guide and Procedures on Investment Surveillance, KPPA is obligated to make a semesterly report to BKPM in July and January. This activity report must at least include updates on activity realization and employment information.
Trade Representative Office
Trade Representative Office or KP3A is a currently placed in a grey legal area. It used to be regulated and supervised by both the Ministry of Trade in Minister of Trade Regulation No. 28/M-DAG/PER/6/2010 on Guide and Procedures on Issuance of Foreign Trade Representative Office License and BKPM in BKPM Regulation No. 13 of 2017 on Guide and Procedures on Investment Licensing and Facilities. However, with the issuance of BKPM Regulation No. 5 of 2019, KP3A licensing is no longer regulated under BKPM, leaving it solely to the old but not yet revoked Minister of Trade Regulation. In practice, however, the licensing is processed in OSS with the following requirements:
a) Letter of appointment (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
b) Letter of intent (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
c) Letter of a statement (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
d) Letter of reference;
e) Id and photo of the chief of representative.
The applicant can submit the application together with the required documents to the OSS system, and the KP3A license will be issued in a day. The validity of the license would be the same as the period of activity of the Representative Office as stated in the letter of reference. Furthermore, despite the licensing is not regulated under BKPM, KP3A also have similar activity report obligation to BKPM just like KPPA. According to BKPM Regulation No. 7 of 2018 on Guide and Procedures on Investment Surveillance, KPPA is obligated to make a semesterly report to BKPM in July and January. This activity report must at least include updates on activity realization and employment.
Construction Representative Office
Construction Representative Office or BUJKA is regulated under the Minister of Public Work Regulation No. 09/PRT/M/2019 on Licensing Service Guidelines for Foreign Construction Service Business Entities. Unlike KPPA and KP3A, licensing for BUJKA is processed in OSS and the Ministry of Public Work. The applicant would need to submit the application in OSS first, then at the Ministry of Public Work. The Ministry of Public Work would scrutinize the application and give their approval via OSS system in the form of foreign construction work license (IUJKA). Even as a Representative Office, BUJKA is allowed to conduct construction work to a certain degree, however, this also means the compliance is much more complicated compared to the other Representative Offices. The requirements in order to acquire the license are:
a) Have B (Big) Construction Qualification as proven by Enterprise Certificate (SBU) issued by Construction Association;
b) Have a certified Technical Employee as required by B Construction Qualification;
c) Letter of appointment (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
d) Letter of intent (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
e) Letter of a statement (acknowledged by Indonesian Embassy/trade attaché and legalized by a public notary);
f) Letter of reference; and
g) Id and photo of the chief of representative.
Unlike KPPA and KP3A, BUJKA’s validity is limited three years, however, it is extendable afterwards. Not only pre-registration, during the activity BUJKA has legal obligation to enter into a cooperation agreement with a local construction company. As for post-registration, similar to KPPA and KP3A, BUJKA also has the same activity report obligation, however, it is reported to both BKPM and Ministry of Public Work and it is reported annually instead of semesterly. The information required to be reported is much more complex, as it includes the details of the cooperation agreement and the construction project.
Foreign Representative Office Oil and Gas Sub-Sector
Foreign Representative Office Oil and Gas Sub-Sector or KPA Migas is regulated under BKPM Regulation No. 13 of 2017. Similar to KP3A, after the revocation of BKPM Regulation No. 13 of 2017, KPA Migas licensing is left in a grey area. However, in the practice, the licensing is pretty much the same as KPPA with the addition of a requirement to submit a recommendation from the Directorate General of Oil and Gas. The rest is pretty much the same as the applicant would need to process the license in NSWI system and also submit a semesterly activity report to BKPM.
Author: Benedictus Giovanni
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Investment Regulatory.
For further queries and information, contact us:
+62 21 5080 6536 | info@gaffarcolaw.com | www.gaffarcolaw.com
