Types of Foreign Business Forms in Indonesia

Foreign companies planning to operate in Indonesia can choose several legal structures depending on their commercial objectives, industry sector, and long-term strategy.

While most foreign investment is conducted through a PT PMA (foreign-owned limited liability company), Indonesian regulations also provide alternative representative office models for companies that do not intend to conduct full commercial operations.

PT PMA (Foreign Investment Company)

In general, foreign investment in Indonesia must be carried out through a Perseroan Terbatas (PT) established under Indonesian law and domiciled in Indonesia.

A PT PMA is a limited liability company with foreign shareholding, either fully foreign-owned or in joint venture with Indonesian shareholders. Foreign investors may:

• Subscribe to shares at the time of establishment
• Acquire shares in an existing company
• Participate through other lawful investment mechanisms

A PT must be established by at least two founders through a notarial deed in Bahasa Indonesia. The founders may be Indonesian or foreign individuals, or Indonesian or foreign legal entities.

A PT PMA is the most suitable structure for companies that intend to conduct direct commercial activities, generate revenue in Indonesia, and hire employees locally.

Representative Office/RO (KPPA)

A Kantor Perwakilan Perusahaan Asing (KPPA) is a foreign company’s representative office in Indonesia.

Under regulations issued by the Ministry of Investment/BKPM, a KPPA is allowed to:

• Act as a liaison, supervisor, or coordinator
• Prepare for the establishment of a PT PMA
• Conduct market observation and coordination activities

However, a KPPA cannot generate revenue, engage in commercial transactions, or manage operational activities of companies in Indonesia.

Key characteristics:

• Must be located in an office building in a provincial capital
• The head of representative must reside in Indonesia
• If employing foreign workers, Indonesian employees must also be hired
• Classified as low-risk under the OSS risk-based licensing system

This structure is commonly used for market exploration before full investment.

Foreign Electricity Supporting Services Representative Office (JPTLA)

This representative office is specifically regulated for foreign companies providing electricity supporting services, as governed under Peraturan Pemerintah No. 25 Tahun 2021.

Permitted activities include:

• Consultancy in electrical installation
• Construction and installation of electrical systems
• Maintenance of electrical installations

The JPTLA structure is limited to large-scale, high-value projects and must:

• Partner with local Indonesian companies
• Employ more Indonesian workers than foreign workers
• Appoint an Indonesian citizen as the responsible person
• Conduct technology transfer
• Prioritize domestic products

Operating without proper licensing may result in significant administrative sanctions.

Foreign E-Commerce Representative Office (KP3A PMSE)

Under Peraturan Menteri Perdagangan No. 31 Tahun 2023, foreign digital commerce platforms (PPMSE) that meet certain thresholds must establish a representative office in Indonesia.

This applies to foreign electronic system operators that meet specific transaction, shipment, or traffic thresholds within Indonesia.

A KP3A PMSE:

• Acts on behalf of the foreign e-commerce platform
• Must obtain SIUP3A PMSE via OSS
• Can only represent one foreign PPMSE
• Is limited to consumer protection, dispute handling, and domestic product development support
• Cannot independently conduct commercial sales

This regulation aims to protect Indonesian consumers and ensure regulatory oversight over cross-border digital platforms.

Foreign Trading Representative Office (KP3A)

A Kantor Perwakilan Perusahaan Perdagangan Asing (KP3A) is designed specifically for foreign trading companies.

Permitted activities include:

• Promoting and marketing goods produced abroad
• Conducting market research
• Supervising local sales activities
• Entering into export contracts on behalf of the appointing foreign company

KP3A is prohibited from conducting direct trading or independent commercial transactions in Indonesia.

It may operate as:

• Selling agent
• Manufacturer’s agent
• Buying agent

KP3A that registers through the OSS system will receive:

• NIB (Business Identification Number)
• SIUP3A (Foreign Trading Representative License)

Each foreign employee hired must be balanced with Indonesian workers, according to manpower requirements.

Foreign Construction Representative Office (BUJKA)

A Kantor Perwakilan Badan Usaha Jasa Konstruksi Asing (BUJKA) is a foreign construction representative office regulated under Peraturan Pemerintah No. 5 Tahun 2021.

BUJKA may carry out:

• Construction consultancy
• Construction work
• Integrated construction services

However, it must meet large-scale qualification standards and comply with Indonesian certification requirements, including:

• Construction Business Entity Certificate (SBU)
• Construction Competency Certificate (SKK)

The technical lead must be an Indonesian citizen, while foreign nationals may serve in roles related to technology transfer.

Permanent Establishment (Bentuk Usaha Tetap – BUT)

A Bentuk Usaha Tetap (BUT) refers to a foreign individual or foreign legal entity that conducts business activities in Indonesia and is considered a non-resident taxpayer under Indonesian tax law.

This structure is commonly used in sectors such as oil and gas and certain cross-border project-based activities. A BUT is subject to Indonesian taxation rules applicable to permanent establishments.

Key Regulatory Framework Foreign Investors Must Understand

Before choosing a business structure in Indonesia, foreign investors must consider the core regulatory principles that shape market access:

1. Risk-Based Licensing (OSS-RBA System)

Indonesia applies a risk-based licensing system under the OSS (Online Single Submission) platform. Business activities are categorized into:

• Low Risk
• Medium-Low Risk
• Medium-High Risk
• High Risk

The level of risk determines which licenses are required beyond the NIB (Business Identification Number). Higher-risk sectors require additional operational permits and verifications before commercial activities can begin.

2. Large-Scale Business Requirement for PT PMA

Foreign investment companies (PT PMA) are generally classified as large-scale enterprises under Indonesian investment regulations.

This means:

• Foreign investors are expected to operate at a significant capital scale
• Micro and small business sectors are typically reserved for Indonesian MSMEs
• Certain business activities may have additional sector-specific requirements

3. Restricted and Closed Business Sectors

Indonesia regulates foreign ownership through a sector classification system (commonly referred to as the Positive Investment List).

• Some sectors are fully closed to foreign investment (e.g., narcotics production, gambling).
• Some sectors are restricted with foreign ownership limitations or partnership requirements.
• Other sectors are fully open to foreign investors.

Careful KBLI classification analysis is essential before incorporation.

Which Structure Is Right for You?

Choosing the appropriate business form depends on:

• Whether you intend to generate revenue locally
• Your industry sector
• Project scale and contract value
• Manpower structure
• Long-term expansion plans

For companies that want full operational capacity, direct contracts, and long-term commercial presence, a PT PMA is typically the most strategic option.

Representative offices are generally suitable for market testing, coordination, or sector-specific activities with regulatory limitations.

Why Choose BaliEasy

Business regulations in Indonesia change frequently, and licensing requirements can become more detailed over time.

Setting up a business in Indonesia is not just about registering a company, it requires correct structuring, proper KBLI selection, OSS registration, licensing alignment, and ongoing compliance to avoid delays or legal issues.

BaliEasy provides end-to-end support for PT PMA establishment, from planning the right structure to full operational readiness. We handle incorporation, OSS registration, NIB issuance, and sector-specific licensing, ensuring everything is aligned with the latest regulations.

We also assist with Investor KITAS applications, so directors or shareholders can legally stay and manage their business in Indonesia.

With 24/7 human customer support, clear guidance, local expertise in Bali, and transparent pricing with no hidden fees, BaliEasy helps you build and run your business smoothly while staying compliant as regulations continue to evolve.