SETUP Construction REPRESENTATIVE OFFICE (BUJKA) IN INDONESIA
Foreign construction companies that wish to expand their activities to Indonesia have the option to establish a construction representative office (BUJKA) or a limited liability company active in the field of construction. In contrast to other types of representative offices, a construction representative office (BUJKA) is allowed to join tenders and perform projects in Indonesia after it has set up a cooperation in the form of a joint operation with a local construction company.
Most foreign construction companies prefer to establish a BUJKA rather than a limited liability company, because it requires no initial share capital investment and the process of establishment is less complex and faster.
Minimum Establishment Requirements
A construction representative office (BUJKA) must comply with the following minimum requirements to be able to join tenders and perform construction projects in Indonesia:
- Cooperation with local construction company (PT). The BUJKA can only join tenders through a cooperation with a local construction company. The shares of the local company must be 100% owned by Indonesian citizens or local companies without foreign shareholders. The BUJKA and the local construction company will set up a cooperative entity, the Joint Operation, with which they shall join tenders and perform construction projects.
- Company category: Large. Both the foreign construction company (the parent company of the BUJKA) and the Indonesian cooperation partner must be construction companies which are categorized as large construction companies. The foreign construction proof this by handing over evidence of recently performed projects.
- Type of projects. The BUJKA can only be involved in construction projects with high risk, high tech and high costs construction projects. Construction projects which do not fall within these categories are only open for local construction companies.
The Joint Operation
The Joint Operation is a unique legal vehicle in Indonesia, which is not clearly regulated. A Joint Operation is a consortium of two companies, which do not form a new legal entity, but jointly enter into a cooperation agreement. A Joint Operation is temporary and shall seize to exist after the construction project ends. Although the Joint Operation is legally not considered a separate legal entity, it must register its own tax identification number (NPWP).
A Joint Operation is however not a limited liability company and all parties of the Joint Operation will be jointly and severally liable for any costs/losses from third parties. Of course parties can regulate liability between the contract parties in the Joint Operation agreement.
Corporate Structure
Construction Representative Office (BUJKA)
The BUJKA is headed by the Chief Representative, who is appointed by the foreign construction parent company. The chief representative can be either a foreign or Indonesian national. The foreign construction parent company can replace the Chief Representative at any time by official letter of appointment of the new chief.
In case a foreign Chief Representative is appointed, the BUJKA is required to apply for a long term work and stay permit.
Joint Operation
The joint operation is a consortium between the BUJKA and the local construction company. The parties can decide on who will lead the joint operation in the joint operation agreement between the parties.
Processing Timeline BUJKA
The processing timeline of a BUJKA is more complex than other types representative offices. Below is an overview of the required steps to be taken, including the estimated processing times in Jakarta.
