Setup of Trade Representative Office (KP3A)
A trade representative office (KP3A) can perform trading activities on behalf of a foreign company (the parent company of the trade representative office) in Indonesia. The trade representative office (KP3A) has a lot of similarities with a general representative office (KPPA), however – as the name explains – a trade representative office focuses on representing the parent company in trade activities in Indonesia. Similar to the KPPA, there are limitations to the activities a trade representative office is allowed to perform in Indonesia.
There are three types of KP3A:
- the Buying Agent, which will supervise, monitor suppliers, perform quality controls and assist the parent in the selection of new potential suppliers;
- the Selling Agent, which will act as promoter of the parent company in Indonesia. In addition it can select potential clients and connect the parent company with such potential clients;
- the Manufacturing Agent, which will liaise with stakeholders and perform market research for the potential incorporation of a manufacturing facility in Indonesia.
For investors that require a trading company which can perform trade transactions directly without restrictions, the following options are available: a PT with nominee shareholders or a PMA with foreign shareholders.
Minimum Establishment Requirements
The trade representative office (KP3A) is not required invest any capital during the setup of the company. There is no shareholder structure in a representative office, so investors are not required to pay-up any shares. Besides that, the Indonesian government does not require a KP3A to invest in the Indonesian economy within a certain amount of time.
The establishment requirements for a trade representative office are:
- Parent Company. is that there is an existing entity abroad (parent company) for which the representative office shall act as its representative in Indonesia. Individuals or Indonesian entities are therefore not allowed to open a representative office .
- Business Activities. Foreign representative offices are not allowed to be active in business fields which are closed for foreign investors based on the Negative Investment List. Since the representative office has no shareholder structure, the restrictions in the Negative Investment List on foreign shareholder ownership does not apply.
Allowed and Restricted Activities
The trade representative office (KP3A) can perform the following activities:
- Perform promotional and introductory activities for new products of the parent company in Indonesia;
- Perform research and advise on the import of products into Indonesia or export from Indonesia;
- Advise and provide training to customers on how to use of the products;
- Perform market research on the Indonesian market to confirm there is potential for the goods sold by the parent company in Indonesia; and
- Facilitate the negotiations and signing of commercial contracts between the parent company and clients or suppliers.
The KP3A is not allowed to perform any sales and purchase activities in Indonesia. All commercial transactions must be between the parent company and the client or supplier. This means that a KP3A is not allowed to generate any income in Indonesia.
Similar to a KPPA, the only position in a KP3A which is mandatory is the Chief Representative. The chief is appointed by the parent company and manages the day-to-day business of the office. The parent company can replace the Chief Representative by official letter of appointment of a new chief.
In case the appointed Chief Representative is a foreign national, the KP3A must apply for a long term work and stay permit after the chief is officially appointed.
Processing Timeline KP3A
For the setup of a trade representative office (KP3A) the below processing steps are involved. In case a KP3A is established outside Jakarta additional processing times may apply.