The Differences between A Branch Office and A Representative Office
International investment has brought Indonesian economic climate to the peak of profitable business. However, an openness of a country towards international investment might drive to some issues. Hence, in a moment of early 21th century, Mr. Abdurrahman Wahid, the former President of Indonesia, proposed a decree in which foreign companies could open their representative offices in all over the province’s capital based on Keppres No. 90 Th. 2000 (Presidential Decree No. 90 of 2000).
By establishing a progressive law, the President expected for a better investment climate. At the time, Indonesia had just gone through an economic crisis which was happening by 1998. Therefore, the purpose of proposing the decree was to speed up the recovery of business development by pushing out the national and international investment. Yet, in Indonesia, the law differentiates representative office and branch office. Moreover, the branch office is regulated on Peraturan BKPM Republik Indonesia No. 13 Th. 2017 (BKPM Republic of Indonesia Decree No. 13 of 2017). Hence, the foreign investors have to know and understand about the differences between them.
A Representative Office
According to Article 1 of Presidential Decree No. 90 of 2000, a representative office is led by a person or people who are foreigners or Indonesians assigned to be a representative of a foreign company. Subsequently, the representative office has a task to handle out the company’s administrative issues with or without its affiliations. In addition, this office doesn’t have any capability to work like the branch office.
Since it is a business company, Article 3 of the Decree mentions administrative things to be completed as a legal way to build up a business in Indonesia. Moreover, it mentions that the work permit of the officers who are working in the office would be given by Indonesian Investing Coordinating Board and Ministry of State Owned Enterprises. Therefore, in any case, every business should uphold the law issued by the Government in order to actualize the purpose of this Decree which speeds up economic development through international investments.
A Branch Office
A branch office is regulated in Indonesian Investing Coordinating Board Republic of Indonesia’s Decree (Peraturan BKPM) No. 13 of 2017. By issuing the Decree, the Government hopes for a change in economic climate through capital investment. Therefore, branch office has to work corresponding to its capacity based on the regulations which are working like a delegate of the holding company and has an authority to produce a policy.
Article 4 of the Decree says that branch office is one of the non-fiscal services which is mentioned in capital investment facility services section. Moreover, the company has to get a KP3A (Izin Kantor Perwakilan Perusahaan Perdagangan Asing) and SIUP3A (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing). Subsequently, KP3A could be a selling agent, a manufacturer agent, or a buying agent. Yet, the KP3A cannot carry out trade activities and transactions as it is mentioned in Article 38 (1) of Investing Coordinating Board Decree on KP3A section.
In summary, the differences are explained in the administrative things and its framework. Despite, these offices are almost similar since these offices are the delegates of their holding companies. Lastly, the branch office has a control over its region.