Difference Between PT PMA and Foreign Company Representative Office KPPA Indonesia

Corporate Secretary Service Indonesia – Foreign investment is one of the main drivers of a country’s economic growth. In an effort to improve the investment climate, Indonesia provides various options for foreign companies to operate within the country.

There are two forms of entities frequently encountered in the context of foreign investment in Indonesia: a Limited Liability Company with Foreign Investment (PT PMA) and a Foreign Company Representative Office (KPPA). Although both are foreign entities, PT PMA and KPPA Indonesia have distinct characteristics.

Therefore, understanding the differences between PT PMA and KPPA is crucial for foreign investors looking to expand their business in Indonesia.

Differences Between PT PMA and KPPA

The following are several points that illustrate the fundamental differences between PT PMA and KPPA, including:

Definition

The definition of PT PMA is regulated in Law Number 25 of 2007 concerning Investment (Law 25/2007), which has been partially amended by Law Number 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation into Law (Law 6/2023).

PMA is an investment activity to conduct business in the territory of the Republic of Indonesia carried out by foreign investors, whether using foreign capital entirely or in partnership with domestic investors (Article 1 number 3 of Law 25/2007).

Furthermore, the definitions of PT PMA and KPPA can also be found in Investment Coordinating Board Regulation Number 4 of 2021 concerning Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities (BKPM Regulation 4/2021).

According to Article 1 number 11 of BKPM Regulation 4/2021, a PT PMA is a foreign individual business actor, a foreign business entity, and/or a foreign government that invests in the territory of the Republic of Indonesia.

Read Also: Procedures for Establishing a Representative Office of a Foreign Trading Company or KP3A Setting Up Process Indonesia

Meanwhile, a KPPA is an Indonesian individual or a foreign individual, or a business entity that represents a foreign business actor with approval to establish an office in the territory of the Unitary State of the Republic of Indonesia (Article 9 paragraph (3) of BKPM Regulation 4/2021).

Simply put, a PT PMA is a business entity that has its own legal entity, separate from its parent company. A KPPA, on the other hand, does not have its own legal entity and is an extension of its foreign company.

Business Capital

Referring to Article 12 paragraph (1) of BKPM Regulation 4/2021, it is explained that business entities classified as PMA are categorized as large businesses and are required to comply with minimum investment requirements, unless otherwise stipulated by law.

The minimum investment requirement for PMA is a total investment of more than IDR 10 billion, excluding land and buildings, per business field in the 5-digit Indonesian Standard Industrial Classification (KBLI) per project location (Article 12 paragraph (2) of BKPM Regulation 4/2021).

However, this requirement is exempted for certain sectors, including:

• Specifically for wholesale trade business activities, greater than IDR 10 billion excluding land and buildings, is per the first four digits of the KBLI;
• Specifically for food and beverage service business activities, greater than IDR 10 billion excluding land and buildings, is per the first two digits of the KBLI per location;
• Specifically for construction business activities, greater than IDR 10 billion excluding land and buildings in a single activity, is per the first four digits of the KBLI;
• Specifically for industrial business activities producing product types with different 5-digit KBLI numbers within a single production line, exceeding IDR 10 billion, excluding land and buildings.
• Specifically for property development and management business activities, the following provisions apply:
  1. Property in the form of a complete building or an integrated housing complex with an investment value exceeding IDR 10 billion, including land and buildings; or
  2. Property units not within a complete building or an integrated housing complex, with an investment value exceeding IDR 10 billion, excluding land and buildings.

Representative offices (including KPPA Indonesia) and foreign business entities are exempt from investment and capital requirements (Article 13 of BKPM Regulation 4/2021).

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