Representative offices are offices set up by companies abroad. It is a simple and fast way to establish a legal entity in a foreign market. Representative offices handle business activities for their parent companies locally. One type of representative office in Indonesia is the representative office for trading (KP3A). This type of representative office can conduct trading activities for its parent company.

Business Activities for KP3A

KP3As can act as the parent company’s selling, manufacturing, and buying agent in Indonesia. The parent company may also delegate tasks related to establishing branch offices in Indonesian cities to its KP3A.

However, because representative offices cannot generate income in Indonesia or issue invoices, all transactions should be under the parent company’s name.

Opening a KP3A is a good choice for a company with plans to create a network of agents and distributors in Indonesia.

Requirements and Prerequisites to Open a KP3A

Requirements and Prerequisites to Open a KP3A

• ◉ The parent company must exist outside of Indonesia
• ◉ The main business activities of the parent company should involve trading
• ◉ The parent company must be the principal of products, not a broker
• ◉ There must be an appointed Chief Representative Officer (CRO)
  • * The appointed CRO can be an Indonesian national or a foreigner but must be a resident of the country.
  • * If the CRO is a foreigner, the KP3A can apply for his or her work permit after establishment.
• ◉ Its office must be in a commercial office building
  • * A KP3A can establish its office anywhere and does not need to be in a capital city.
• ◉ The parent company should also prepare the following documents:
  • * Letter of Appointment
  • * Letter of Intent
  • * Letter of Statement

Timeline to set up a KP3A in Indonesia

The process to open a representative office in Indonesia is quicker and simpler than opening a limited liability company. The table below shows how long it takes for Emerhub to acquire the documents necessary to establish a KP3A.

Documents obtained	Timeline in working days
KP3A license	1
Tax registry	3
TOTAL	4

Compliance for KP3A

KP3As cannot earn income but will still need to report withholding taxes on a monthly basis. The KP3A pays withholding tax on:

• ◉ Employee salaries
• ◉ Office rental fees
• ◉ Other administrative expenses.

The representative office must submit an activity report once a year to the Investment Coordinating Board (BKPM) of Indonesia. The activity report will be the basis for a license extension. 

KP3As with more than 10 employees must also have an Institution of Social Security for Manpower (BJPS) registration.