Get to Know the Difference Between PT PMA and Representative Office – As time goes by and economic stability, quite a few foreign investors are interested in setting up companies in Indonesia. Not necessarily establishing a company in Indonesia, many foreign companies also choose to establish a Representative Office (KPPA) with several considerations.

The difference between PT PMA and Representative Office that must be understood

Based on its definition, PT PMA is a company that carries out business activities and has capital sources from foreign parties. Business activities can be carried out entirely by foreign investors or join with domestic investors. Meanwhile, a Representative Office (KPPA) is an office led by an individual foreigner or Indonesian citizen who is appointed directly by a foreign company abroad as its representative in Indonesia and does not carry out business activities. The Representative Office (KPPA) prohibition is stated in the Head of BKPM regulation No. 22 Tahun 2001, which strictly prohibits KPPA from carrying out commercial activities. The purpose of establishing Representative Office (KPPA) is to develop the business of PT PMA and its affiliates. Even though Representative Office (KPPA)  does not carry out business activities, it still has to fulfill tax obligations.

Requirements for the establishment of PT PMA and KPPA

After knowing the differences between PT PMA and Representative Office (KPPA), we also need to know the requirements for establishing PT PMA and Representative Office (KPPA) which must be met, including the field and type of business. For business fields and types, PT PMA and Representative Office (KPPA) need to check in DNI (Negative Investment List) so that they have clarity regarding the permitted business fields. The requirements need to fulfilled is:

PT PMA

1. Business types such as Real Estate, IT related, construction, distributor, shall have physical office address, cannot be Virtual Office.
2. PMA can only establish wholesale trading, retail only for local companies.
3. Virtual office can be used for wholesale trading and representative offices.
4. Paid-up Capital IDR 10,001,000,000 (until 31 December 2024)
5. Minimum investment IDR 10,001,000,000 (until 31 December 2024)

Representative Office (KPPA)

1. Prepare the establishment of PT PMA of the Company in Indonesia (market testing, research, feasibility study, etc)
2. Handle the Company’s interests in Indonesia (as an advisor, controller, liaison)
3. Cannot earn any profit
4. Work KITAS is limited to 2 people: CRO and assistant of CRO
5. Representative offices can use Virtual Office

In general, KPPA can be an initial process that foreign companies can choose before investing capital in Indonesia. Usually KPPA is established to test feasibility and see the extent of market interest in the product to be offered. So which type of company relate with your business fields?

We and the team will assist you in the process of setting up a company and obtaining permits related to your company’s business in Indonesia. Call us now for more information at Tel. +62877-1449-8500 or email admin@indoservice.co.id.