Establishing a PT PMA does not automatically require a foreign investor to close an existing representative office in Indonesia. Keeping both is possible where the representative office continues to perform a distinct role for the foreign parent within the activities permitted under its representative-office regime.
What Changes When a PT PMA Becomes Operational?
A representative office provides a foreign company with a limited presence in Indonesia. The activities it can perform depend on the type of representative office and the applicable licensing regime. A representative office is restricted to the activities permitted under that regime and cannot be used as a substitute for a PT PMA to conduct commercial activities outside that scope.
Need to decide whether to retain your representative office? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
A PT PMA is an Indonesian limited liability company with foreign investment. Within the scope of its licensed business activities, it can enter into commercial contracts, invoice customers, receive revenue, and employ personnel to conduct its Indonesian operations. Foreign investors moving from a representative office to a PT PMAÂ must separately address the establishment and transition requirements for the new entity.
When Should You Keep or Close the Representative Office?
The representative office can remain where it continues to represent the overseas parent for activities permitted under its applicable regime, while the PT PMA separately conducts the group’s Indonesian commercial operations.
The PT PMA’s licenses do not expand the activities permitted to the representative office. If customer contracts, invoices, revenue collection, or other commercial activities fall within the PT PMA’s operations, the representative office cannot conduct those activities merely because the two are affiliated.
Ready to close your representative office? Speak with MAP Resources Indonesia at info@mapresourcesindonesia.com
Closure becomes more relevant when the PT PMA has taken over the activities previously performed through the representative office and no distinct permitted role remains for the foreign parent to maintain through that office.
What Happens to Employees, Contracts, and Permits if You Close?
Establishing the PT PMA does not automatically move the representative office’s existing arrangements to the new company.
Employees moving to the PT PMA may require new employment arrangements. Foreign employees may also require changes to immigration and work authorization arrangements where these are connected to the representative office.
Moving your operations to a PT PMA? MAP Resources Indonesia can support the transition. Email info@mapresourcesindonesia.com
The PT PMA is not automatically substituted for the representative office or foreign company under an existing contract. Office leases, supplier agreements, and other contracts may need to be terminated, assigned, novated, or replaced depending on their terms.
The representative office must also complete its applicable tax and reporting obligations and formally process the revocation of its representative-office business licensing through the applicable OSS procedure. Indonesia’s OSS system provides specific revocation procedures for foreign representative offices, including KPPA and separate KP3A procedures.
Tax deregistration is also a separate process rather than an automatic consequence of establishing the PT PMA. The Directorate General of Taxes provides an NPWP deregistration procedure for taxpayers that no longer meet the applicable requirements, including a permanent establishment that has ceased its activities in Indonesia.
MAP Resources Indonesia Can Support Your PT PMA Transition
MAP Resources Indonesia can assist foreign investors in assessing whether a representative office should remain after establishing a PT PMA and, where closure is appropriate, support the required corporate, licensing, and administrative procedures. Contact us today at info@mapresourcesindonesia.com.
