Proven Benefits of Opening a Representative Office in Indonesia for Foreign Companies

With a population of 280 million and a growing middle class, Indonesia remains a key target for international expansion. Yet, not every foreign company is ready to launch full commercial operations.

For those seeking to explore the market, build local partnerships, or support their global network, establishing a Representative Office in Indonesia is often the most strategic and compliant first step.

What Is a Representative Office in Indonesia?

A Representative Office, officially known as Kantor Perwakilan Perusahaan Asing (KPPA), is a non-commercial legal presence for foreign companies in Indonesia. This entity is regulated under BKPM Regulation No. 4 of 2021 with several advantages, such as:

• Low Setup Cost: No minimum capital or complex sectoral licensing
• Fast Setup Timeline: Most applications complete within 7–10 working days
• Legal Presence: You can sign non-commercial contracts, host events, and open bank accounts
• Brand & Market Visibility: Useful for brand-building before launching sales

But some limitations need to be known about KPPA, such as:

• No Revenue Activity: Cannot issue invoices or conduct direct sales
• Limited Locations: Cannot be opened in rural or small cities

Why Do Foreign Companies Use a Representative Office?

Unlike other business entities, representative offices are an easier and cheaper alternative that still offers benefits for companies that are still hesitant to enter the Indonesian market. Although it cannot generate revenue directly, it still provides benefits such as the following.

1. Explore Market Potential
   Understand customer behavior, assess competition, and test product relevance before making heavy investments.
2. Build Strategic Partnerships
   Liaise with suppliers, distributors, and government bodies as part of their Southeast Asia expansion strategy.
3. Reduce Compliance Risk
   Avoid the complexity and cost of setting up a full PT PMA structure before the business is fully viable.
4. Maintain Corporate Branding
   Establish a legal presence to manage branding, PR, and representational duties without commercial commitments.
5. Coordinate Regional Operations
   Serve as a coordination hub between headquarters and affiliates across ASEAN.

How to Set Up a Representative Office in Indonesia

The process of establishing a KPPA is relatively straightforward compared to a PT PMA. Here’s how it works:

1. Appoint a Chief Representative

This person will legally represent the foreign company in Indonesia. The representative must reside in Indonesia and can be an expatriate with a valid KITAS (work permit).

2. Submit Application via OSS System

The foreign company must register via the OSS RBA platform, entering corporate details, purpose, and planned activities. The system will generate a Business Identification Number (NIB).

4. Register NPWP

Despite being non-commercial, the office must register a Taxpayer ID (NPWP) and obtain a domicile letter from the building management.

5. Apply for KITAS for the Chief Representative

If the Chief Representative is a foreigner, a work permit (KITAS) must be processed, allowing lawful stay and activity in Indonesia.

For foreign businesses not ready to commit to full operations, opening a Representative Office in Indonesia offers the ideal low-risk solution. It provides the opportunity to legally build your presence, understand the market, and prepare for future investment.