Establishing a Foreign Representative Office in Indonesia
By Simbolon & Partners Law Firm
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This overview briefly sets out the law and procedures relating to establishing a foreign representative office. The information contained herein is based upon our working experience with and understanding of relevant Indonesia Laws. As Indonesian laws is evolving rapidly, readers are advised to seek further information and legal advice when considering the establishment of a foreign representative office in Indonesia.
Foreign Representative Office is defined as an office that is utilised by foreign companies or groups of foreign companies for purposes of managing interest of company or affiliated companies, preparing establishment and development of foreign investment company in Indonesia and in other countries.
Indonesian Laws and regulations classified representative offices into three forms:
a. Foreign Representative Office;
b. Foreign Trade Representative Office;
c. Foreign Construction Service Representative Office.
The above classification is based on the type, purpose and objectives of establishment.
1. Foreign Representative Office
Foreign Representative Office shall be led by one or more Indonesian or Foreign Citizen that considered being Representative Office Executives. The appointment of Representative Office Executives shall be based on the letter of appointment from the foreign company or groups of foreign companies.
Scope of Activities
Activities of Foreign Representative Offices are limited to:
a. its role as supervisor, connector, coordinator, and to manage the interest of the company or affiliated companies in Indonesia an/or overseas;
b.will not looking for earnings from Indonesian Resources, that includes for not conducting activity or made a contract/sale and purchase of goods or services with domestic companies or personal;
c.will not participate in any other forms of the management of a company, subsidiary company or branch company that located in Indonesia.
Advantages of establishing a foreign representative office in Indonesia
1.Foreign Representative Office is an ideal way for a foreign company to gain a market presence in Indonesia.
2.Foreign Representative Office can be 100% foreign-owned and controlled, and has no director or shareholder requirements.
3.Foreign Representative Office has no minimum share capital requirements.
Permits/licenses shall be obtained
Referring to the rules and regulations with respect to the operations of a Representative Office in Indonesia as stipulated in the frame work of the Decree of the Head of BKPM No. 1/SK/2008, to establish a Foreign Representative Office, the followings are the permits/licenses shall be obtained:
1.A Letter of Approval issued by the Investment Coordinating Board ("BKPM") as main license;
2.A Domicile Letter from by the local government;
3.A Tax Payer Registration Number (NPWP) from the Tax Office; and
4.A Company Registration Certificate from the Company Registration Office.
Subsequently, the initial requirements to obtain the above permits/license:
1.Letter of appointment from the parent company.
2.Power of Attorney to sign the application if the participant is represented by another party.
3.Articles of Association of the parent company and any amendment(s).
4.Copy of valid passport (for foreigner) or copy of identification card number (for Indonesia) who will be proposed as a Representative Office Executive
5.Letter of statement concerning the willingness to stay, and only work in the position as a Representative Office Executive without doing other business in Indonesia.
The obtaining Letter of Approval issued by BKPM normally takes a time frame
of 10 (ten) working days.
2.FOREIGN TRADE REPRESENTATIVE OFFICE
Scope of Activities
Based on the Regulation of Minister of Trade No. 10/M-DAG/PER/3/2006 concerning Terms and Procedures of Issuance of Trade Representative Business License, the opening of Trade representative office may be in the form of Selling Agent and/or Manufactures Agent and /or Buying Agent.
The Trade Representative Office is permitted to:
1.introduce, promote and improve the marketing of products that manufactured overseas by Foreign Company or Groups of Foreign Companies;
2.provide information or instruction regarding the usage and import of such products to the company or user; (In this regards, the Trade Representative Office shall appoint national company as an agent for the products that promoted, and the appointment shall be based on the approval from the Foreign Company or Groups of Companies);
3.conduct market search and supervise the sales of product in relation to the promotion of the products in Indonesia;
4.conduct market research in relation to supplying of products from Indonesia as required by the principal company;
5.liaise and provide information and guidelines to any prospective Indonesian counterpart on the requirements for the exportation of products;
6.conclude contracts with an Indonesian entity or business counterparts on behalf of the principal company in relations to exportation.
Trade Representative Office is prohibited to conduct trade and sales transactions, in the initial phase up until the completion phase, such as conducting tender application, signing contract, conducting claims and others.
Obtainment of License
In order to conduct its activities, Trade Representative Office must have a Foreign Representative Office Trade Business License (Surat Izin Usaha Perwakilan Perdagangan Asing ďSIUP3AĒ), that valid for the maximum period of 3 (three) years unless regulated differently in the appointment letter, and can be renewed in conformity with the appointment letter.
There are 5 (five) types of SIUP3A:
1.New SIUP3A for Principal Office;
2.New SIUP3A for Branch Office;
5.Replacement of SIUP3A that damage or lost.
In general, SIUP3A may be obtained by written application to the Head of Principal office or Branch Office of Foreign Trade Representative office or proxy to the Directorate Business Management and Registration of Company as the SIUP3A Issuer Officials by filling in the Application Implementation Plan.
Foreign Trade Representative Office is obliged to :
1.Pay for Deposit money to the Bank of Indonesia
2.conduct company registration at the very least 3 (three) months counting from the date of SIUP3A issuance;
3.provide Realization activity Report to the SIUP3A Issuer Official, with the following schedule:
-First report, period of January Ė June continuing years, that conveyed at the latest of July 31st of the continuing year
-Second report, period July Ė December continuing year, that conveyed at the latest of January 31st of the next year;
4. Provide report and data/information concerning the realization of activities if at any time required by Minister or SIUP3A Issuer Official;
5.Provide written report to the SIUP3A Issuer Official, with the reasons of closing and return the original SIUP3A, if the Foreign Trade Representative Office did not conduct itís activities for 6 (six) months in succession or closed the office.
3.FOREIGN CONSTRUCTION SERVICE REPRESENTATIVE OFFICE
Based on the Minister of Public Works Regulation No. 28/PRT/M/2006 concerning license of Foreign Construction Service Representative Office, construction service is defined as consultation service in the construction working plan, service of the implementation of construction works, consultation service of supervising of the construction work.
Foreign Construction Company shall obtain the License of Foreign Construction Representative Office (hereinafter referred as ĎLicenseí), in order to implement its activities in Indonesia. The License considered to be has the same status as business license of the National Construction Service Company, and considered to be valid for 3 (three) years and can be renewed. Furthermore, the license may be obtained after the Foreign Construction Representative Office had obtained participation (penyertaan), competence, classification, qualification that stated in the form of certificate from the Institution of Construction Service Development (Lembaga Pengembangan Jasa Konstruksi).
Requirements and Procedures in Obtaining License of Foreign Construction Representative Office
The application for obtaining the license shall be obtained by filling the form that provided (2 copies), and must be completed with the following company data:
c.Explanation of business activities, and competence (classification and qualification) that given by itís State;
d.Record that evidenced the competence value of the foreign company in itís State that given by the authorized institution in itís state, and legalized by Indonesian Embassy in itís State, and participation evidence (bukti penyertaan) form the institution;
e.Statement Letter form the Representative of Indonesia in the State where the principal office located, which states verification of the company existence;
f.Appointment letter form the mother company to the head of Foreign Construction Representative Office;
g.Taxpayer Registration Number of the company;
h.Receipt of administrative payment;
i.Curriculum Vitae of the candidate of Head Construction Representative Office.
and shall be submitted to the Minister cq. Head of Construction Development Board and Human Resources of the Public Works Department, and copied to the National Institution of Construction Service Development.
Scope of Works
After obtaining the license, the Foreign Construction Service Representative Office may:
a.Seek for Construction Service Works;
b.Made a contract for the obtained construction service works, where the concerned contract must be signed by the head of Representative Office in the name of the mother company;
c.Handle constructions project that considered to be having high risk and/or having high technology and/or having high cost through joint operation;
Rights and Obligations of Foreign Construction Representative Office
Rights of Foreign Construction Representative Office
a.make contact with personal/business entity/government institutions or private national institution for the purpose of looking for the market of construction service;
b.compose a joint cooperation and permitted to participate in the prequalification / tender in accordance with article 3 (2) of the Minister of Public Works Regulation No. 28/PRT/M/2006;
c.Designate and determine the local or foreign manpower as the head of representative, and re-designate and re-determine the concerned manpower.
Obligations of Foreign Construction Representative Office
a.obey the Indonesian Laws and Regulations;
b.provide annual business activity report to the minister or other appointed officials and send the copy to the Institution, which contains:
-activity report; and
-the implementation of activity is in completion with itís obligations under Indonesian laws and regulation, among others concerning tax.
c.Guarantee the implementation of transfer of knowledge to itís business partner (national business entity)
d.Convey the name of National Construction Service Business Entity, register number and Construction Service license, that considered to be itís business partner and/or its sub contract;
e.Convey names of expert and skillful manpower both national and expatriate that works at its office, and completed with the registration evidence from the institution.
Obligation of Foreign Construction Representative Office that participates in the pre qualification or tender
The concerned Representative Office is obliged to have standard capacity for the works or activities that will be conducted in Indonesia and the concerned standard capacity for the works that made overseas must be legalized by the institution.
This article is not intended as legal advice and is not legal advice. This article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed.
AUTHOR: Yudianta Medio Simbolon & Ajeng Yesie Triewanty
Copyright Simbolon & Partners Law Firm
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.