Understanding Representative Office Activities Allowed in Indonesia: PT PMA vs KPPA for Foreign Businesses

Corporate Secretary Service Indonesia – Foreign investors can benefit considerably from Indonesia’s growing economy, but it is vital to choose the appropriate business structure. Many enterprises must make a vital decision: should they incorporate a PT PMA (Foreign Investment Company) or a KPPA (Representative Office)? The response will be determined by your long-term corporate goals and the activities allowed in Indonesian representative offices.

Let’s lay down both possibilities in simple terms so you can make an educated decision.

PT PMA vs KPPA: What’s the Difference?

1. PT PMA (Foreign Investment Company)

A PT PMA is a fully operating company entity that enables foreign investors to conduct business in Indonesia. This structure is excellent if you intend to:

• Manufacture, sell, or provide services directly
• Own assets (land, buildings, or intellectual property)
• Generate revenue and profits within Indonesia

Governed by BKPM Regulation No. 4 of 2021, a PT PMA can be owned by:

• Foreign individuals
• Foreign corporations
• Foreign governments

2. KPPA (Representative Office)

A KPPA, on the other hand, is not a revenue-generating entity. Instead, it serves as a liaison for foreign companies. The representative office activities allowed in Indonesia under a KPPA are strictly non-commercial and include:

• Market research and promotional campaigns
• Coordinating with local partners and government agencies
• Preparing for future PT PMA establishment

Read Also: How to Set Up Representative Office in Indonesia?

Under Article 16 of BKPM Regulation 4/2021, a KPPA cannot:

• Engage in sales, distribution, or direct transactions
• Issue invoices or earn income
• Own business assets

Which One Should You Choose?

When to Opt for a PT PMA

• You want to run a full-scale business (production, sales, services).
• You need to own property or hire local employees.
• Your goal is direct revenue generation.

When a KPPA Makes More Sense

• You only need a local presence for market research.
• Your company wants to explore opportunities before committing to a full PT PMA setup.
• Your activities are limited to the representative office activities allowed in Indonesia (liaison, coordination, and promotion).

Key Considerations Before Deciding

• Long-Term Business Goals: A PT PMA is better for long-term operations, while a KPPA suits temporary market entry strategies.
• Regulatory Compliance: PT PMA requires more complex licensing but offers full business rights. KPPA has simpler registration but strict activity limitations.
• Tax and Financial Implications: PT PMAs are subject to corporate tax, while KPPAs have minimal tax obligations.
• Operational Flexibility: If you need to sign contracts, hire staff, or handle logistics, a PT PMA is mandatory.

Align Your Choice with Business Needs

A PT PMA is the best option if your business must carry out direct business operations. A KPPA is a reasonably priced place to start, though, if your operations are restricted to representative office activities that are permitted in Indonesia, like networking and market research.

Before making a decision, seek legal and business counsel from experts who understand Indonesian legislation. This ensures regulatory compliance and positions your business for success in one of Southeast Asia’s most vibrant regions.

So, don’t worry about developing your business by setting up a company in Indonesia, because Portcorp is here as a solution for your business, also when you need to understand Representative Office activities allowed in Indonesia. Portcorp is your comprehensive corporate secretary service in Indonesia. With our presence, you can get a dedicated company secretary to support you to what you need. Our company secretaries will track deadlines and file paperwork so your business keeps running smoothly. Contact us now on +6221-5020-8090 for your business succeed in the future!