Frequently Asked Questions: #businessentities

A KPPA (Kantor Perwakilan Perusahaan Asing) is a representative office of a foreign company — a licensed Indonesian presence that is not a separate company and cannot trade. It exists to represent its parent: market research, liaison with Indonesian partners and buyers, promotion, and preparing for eventual investment.

What a KPPA can and cannot do:

• Can: employ staff, sponsor a KITAS for its chief representative, rent an office, conduct market development, sign nothing that generates local revenue
• Cannot: issue invoices, earn income in Indonesia, import/export in its own name, or execute sales contracts — revenue-generating activity requires a PT PMA

Questions we field most often:

• Can the chief representative be a foreigner? Yes — the chief of a KPPA may be foreign or Indonesian; a foreign chief takes a KITAS sponsored by the office
• Does it file taxes? A KPPA has no corporate income, but it still has obligations: registering for tax, withholding and remitting employee taxes, and filing the returns that apply to a non-revenue entity. A tax-reporting-only package (without full commercial accounting) typically fits
• How does it compare on cost and speed? Establishment is generally simpler than a PMA — there is no capital requirement, because there is no company — making it a low-commitment first step

The honest decision rule: if the Indonesian activity will earn revenue within the planning horizon, establish the PT PMA now and skip the intermediate step; converting later means establishing the company anyway. If the next year or two is genuinely about study, relationships and market development, a KPPA buys presence without capital commitment.

See PT.REP for Okusi’s representative office establishment service.

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In Indonesia, foreigners can establish several types of business entities, each with its own characteristics and requirements:

1. PT PMA (Perseroan Terbatas Penanaman Modal Asing)
   • This is the most common form for foreign investment
   • A limited liability company with foreign shareholders
   • Subject to the Positive Investment List (Presidential Regulation 10/2021, as amended), which opens most sectors to full foreign ownership
   • Minimum capital requirements apply
2. Representative Office
   • Types include:
     • Foreign Company Representative Office (KPPA)
     • Foreign Trade Company Representative Office (KP3A)
     • Foreign Construction Services Representative Office (BUJKA)
   • Cannot engage in direct commercial activities or generate revenue in Indonesia
   • Useful for market research, liaison, and promotional activities
3. Branch Office
   • Only available in certain sectors (e.g., banking, oil and gas)
   • Directly controlled by the foreign parent company
   • Limited availability and subject to specific regulations
4. CV (Commanditaire Vennootschap - Limited Partnership)
   • Available to Indonesian citizens only
   • Foreign direct investment must take the form of a PT PMA under Law 25/2007, so a CV is not an option for foreign investors
5. Foundation (Yayasan)
   • Non-profit organization
   • Can be established by foreigners for social, religious, or educational purposes
   • Cannot engage in commercial activities
6. Permanent Establishment (Bentuk Usaha Tetap - BUT)
   • A permanent establishment for tax purposes
   • Not a separate legal entity
   • Typically used for specific projects or contracts

When considering which entity to establish, foreigners should:

• Consult the latest Positive Investment List (which replaced the Negative Investment List in 2021) to check sector conditions
• Consider the nature and scope of their intended business activities
• Evaluate minimum capital requirements and investment plans
• Assess long-term business goals and expansion plans in Indonesia

It’s important to note that regulations and requirements can change, so it’s advisable to consult with a professional service provider like Okusi Associates for the most up-to-date information and guidance tailored to your specific business needs.

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