Are you interested in expanding your business to Indonesia? But before you proceed, it’s important to understand the differences between two entities that are often confusing: KP3A (Representative Office of Foreign Investment Companies) and KPPA (Representative Office of Foreign Companies). In this article, we will delve into the detailed differences between these two entities, helping you make the right decision for your business expansion.
Indonesia, with its large population and rapid economic growth, offers lucrative business opportunities for foreign companies. Many foreign companies have their offices in Indonesia. Expanding services to Indonesia is seen as a significant prospect for the efforts of foreign companies to achieve their financial goals.
However, navigating through Indonesian regulations and business structures may be confusing for those who are new to it. One common question is the difference between KP3A and KPPA.
This is crucial for international business people who are planning to expand into Indonesia because not all foreign offices in Indonesia are allowed to conduct business activities there.
This is emphasized in the Investment Coordinating Board Regulation Number 4 of 2021 concerning Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities (PerBKPM 4/2021). According to PerBKPM 4/2021, the prohibition on seeking profits applies to Representative Offices of Foreign Companies (KPPA). Not only that, there are also several activities that are prohibited for KPPA to carry out in Indonesia.
However, this is different for Representative Offices of Foreign Trading Companies (KP3A). According to Investment Coordinating Board Regulation Number 1 of 2020 concerning Guidelines for Implementing Integrated Electronic Business Licensing Services (PerBKPM 1/2020), KP3A is allowed to carry out profit-seeking activities in Indonesia.
Let’s explore further to gain a better understanding of both.
Representative Office of Foreign Companies (KPPA)
Based on Presidential Decree Number 90 of 2000 concerning Representative Offices of Foreign Companies, and Investment Coordinating Board Regulation Number 4 of 2021, KPPA is a general representative office established for supervision, liaison, and coordination purposes in managing the interests of companies in preparing for the establishment and development of Foreign Investment Companies or PMAs in Indonesia.
The establishment of KPPA is beneficial for a company that wants to enter the Indonesian market with minimal investment before starting a business with a PMA in Indonesia. Basically, KPPA is mandatory in preparing for the establishment and development of foreign-owned companies in the country. The establishment of a KPPA office must be located in an office building in the provincial capital area in Indonesia.
One of the requirements for establishing a Representative Office of Foreign Companies in Indonesia is to submit documents or applications to the Investment Coordinating Board. The submission can be done by the director, foreign director, director in Indonesia, or the management of the foreign company as their representatives.
Furthermore, regarding the KPPA License itself, it can be valid for 3 years and can be extended indefinitely with a specific validity period stated in the appointment letter. This license can only be extended for a maximum of 2 years before the National Spatial Planning Regulation Number 13 of 2017 begins to take effect.
KPPA is prohibited from generating income in Indonesia. This includes not conducting activities or engaging in transactions for the sale and purchase of goods or services with companies or individuals in the country, or managing a company in Indonesia.
Therefore, KPPA only acts as supervisors, liaisons, coordinators, and manages the interests of companies or their affiliated companies in Indonesia and/or other countries.
Representative Office of Foreign Trading Companies (KP3A)
According to the Minister of Trade Regulation Number 10 of 2006 concerning Provisions and Procedures for Issuing Licenses for Representative Offices of Foreign Trading Companies, KP3A is a representative office of a foreign trading company established in Indonesia.
KP3A is established as a representative of foreign trading companies that can take the form of Selling Agents and/or Manufactures Agents and/or Buying Agents.
The three types of representative offices of foreign trading companies or KP3A have their respective functions and tasks, including:
- Selling agents are responsible for cooperation and promotional activities.
- Manufacturing agents are responsible for conducting market surveys.
- Buying agents are responsible for supervision and cooperation.
In KP3A, trading or sales activities are not allowed, similar to KPPA, which is also not allowed to engage in trading or sales activities in Indonesia.
However, KP3A is allowed to open branch offices anywhere in Indonesia.
In the management process, KP3A offices can only be managed by specific individuals, namely those with educational backgrounds from universities and experience in related fields that meet the company’s qualification requirements.
The main function of KP3A is to serve as a promotional tool in promoting products in Indonesia for its parent company abroad.
Conclusion of KPPA and KP3A Representative Offices
Although KP3A and KPPA have similar purposes, representing the interests of foreign companies in Indonesia, the differences in their structures and obligations are crucial to be understood by foreign companies wishing to operate in Indonesia.
With a good understanding of these two entities, companies can make the right decisions according to their business needs and goals.
Now, after reading about the differences, similarities, and related regulations, if you are ready to start your business expansion journey to Indonesia, Bizindo can assist you fully. Through our service offerings, you don’t need to come to Indonesia to handle it. You can start by reading the requirements on this page and proceed with your order.
So, let’s continue this journey with a deeper understanding of the differences between KP3A and KPPA with Bizindo to ensure successful business expansion in Indonesia!
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