Branch Office

A branch office in Indonesia is typically established by a foreign company to conduct business activities in the country. The purpose of a branch office may include:

1. Establishing a physical presence in the market: A branch office allows a foreign company to have a physical presence in Indonesia, which can help them gain credibility and build relationships with local partners and customers.

2. Accessing new markets: Indonesia is a strategically located country with a large consumer market, making it an attractive destination for foreign companies looking to expand their business in Southeast Asia.

3. Exploiting business opportunities: Branch offices in Indonesia can be used to take advantage of business opportunities that may not be available in the company’s home country.

4. Cost advantage: Setting up a branch office in Indonesia can be cost-effective as compared to setting up a wholly owned subsidiary, as it allows the foreign company to leverage existing resources and infrastructure.

5. Compliance with local laws and regulations: A branch office in Indonesia must comply with local laws and regulations, which is an important consideration for foreign companies looking to do business in the country.

Setting up a branch office in Indonesia typically involves the following steps:

1. Choose a company name The company name must be unique and cannot be similar to existing company names. You will have to check the availability of the name with the Ministry of Law and Human Rights.

2. Prepare the necessary documents You will need to prepare the following documents: a copy of the parent company’s certificate of incorporation, a copy of the parent company’s Memorandum and Articles of Association, a copy of the parent company’s latest audited financial statement, a copy of the parent company’s business registration certificate, and a copy of the resolution of the parent company’s board of directors approving the establishment of the branch office.

3. Register with the BKPM You will have to submit the necessary documents and pay the registration fee to the Indonesia Investment Coordinating Board (BKPM). Once the registration is approved, you will be issued a registration certificate.

4. Obtain a business license You will need to apply for a business license with the local authorities, such as the Municipal Council or the City Council, depending on the location of the branch office.

5. Register for taxes You will have to register for taxes with the Directorate General of Taxes (DGT) and obtain a tax file number.

6. Hire employees You will need to hire employees and register them with the Ministry of Manpower.

7. Compliance with other regulations You will need to comply with other regulations such as the Foreign Investment Law for foreign investment in Indonesia.

To set up a branch office in Indonesia, you will need to prepare a number of documents, including a copy of the parent company’s certificate of incorporation, a copy of the parent company’s Memorandum and Articles of Association, a copy of the parent company’s latest audited financial statement, a copy of the parent company’s business registration certificate, and a copy of the resolution of the parent company’s board of directors approving the establishment of the branch office.

Additionally, you will need to provide a copy of the parent company’s power of attorney, appointing a representative in Indonesia to act on its behalf, and a copy of the representative’s passport and work permit.

Moreover, you will need to provide a copy of the lease agreement or proof of ownership for the branch office’s physical location. It’s important to note that all these documents must be legalized by a public notary and the Indonesian embassy or consulate in the country where the parent company is located.

A branch office in Indonesia is restricted in the activities it can engage in, as it is not considered a separate legal entity from the parent company. A branch office is not allowed to engage in any activities that are not related to the business of the parent company, and it is prohibited from issuing shares or raising funds from the public. They are not allowed to enter into contracts or agreements in its own name, and all contracts and agreements must be entered into in the name of the parent company. They also cannot engage in certain regulated activities such as providing certain professional services, such as accounting, engineering, and legal services, which requires separate licenses. They are not allowed to engage in activities that are prohibited by law in Indonesia, such as illegal activities or activities that are considered to be harmful to the public interest.

The manager appointed to a branch office in Indonesia has several responsibilities, including representing the parent company and managing the day-to-day operations of the branch office. The manager is responsible for ensuring compliance with local laws and regulations, including filing of all required reports and returns to the Indonesia Investment Coordinating Board (BKPM) and other relevant government agencies. Additionally, the manager is responsible for maintaining the company’s books and records, preparing financial statements, and ensuring that the branch office’s financial affairs are conducted in accordance with the parent company’s policies and procedures.

They are responsible for managing the branch office’s employees, including hiring, training, and performance management. They must ensure that all contracts and agreements entered into by the branch office are in compliance with the parent company’s policies and the laws of Indonesia. The manager also needs to establish and maintain a good relationship with local partners and customers. They must act in the best interest of the parent company and must not engage in any activities that might be detrimental to the parent company’s reputation.

Yes, there are reporting requirements for branch offices in Indonesia. They are required to file annual returns to the Indonesia Investment Coordinating Board (BKPM) and to submit financial statements on an annual basis. The financial statements must be prepared in accordance with the Financial Accounting Standards (SAK) issued by the Indonesian Financial Accounting Standards Board (DSAK-IAI). The branch office also needs to submit an audited financial statement by an approved auditor, which should be submitted to BKPM within a certain time frame after the end of the financial year. They need to file tax returns with the Directorate General of Taxes (DGT) and submit the returns within the specified time frame.

They need to comply with other regulations such as the Foreign Investment Law and the Capital Investment Coordinating Board Regulation for foreign investment in Indonesia, which may require additional reporting.

A branch office in Indonesia differs from other types of foreign business entities in several ways:

1. Legal status: A branch office is not considered a separate legal entity from the parent company and does not have its own legal identity. Other types of foreign business entities, such as a subsidiary or representative office, are considered separate legal entities and have their own legal identity.

2. Liability: The parent company is fully liable for the actions of the branch office and its employees. Other types of foreign business entities, such as a subsidiary, may have limited liability and the parent company’s liability is restricted to the capital invested in the subsidiary.

3. Ownership: A branch office is fully owned and controlled by the parent company. Other types of foreign business entities, such as a joint venture, may involve shared ownership and control between the foreign company and a local partner.

4. Taxation: A branch office is taxed on its income in Indonesia as if it were a permanent establishment of the parent company, and is subject to corporate income tax. Other types of foreign business entities, such as a subsidiary, may be subject to different tax rules and regulations.

5. Restrictions on activities: A branch office is restricted in the activities it can engage in, as it is not allowed to engage in any activities that are not related to the business of the parent company and it is prohibited from issuing shares or raising funds from the public. Other types of foreign business entities may have more flexibility in terms of the activities they can engage in.

There are several advantages to setting up a branch office in Indonesia for foreign companies, including:

1. Easy to establish: Setting it up in Indonesia is relatively easy and straightforward, as compared to other types of foreign business entities.

2. Direct control: It allows the parent company to have direct control over the operations and management.

3. Familiarity: Setting it up allows the parent company to maintain the same business model, policies, and procedures as in its home country, which can be beneficial for companies that are already well-established.

4. Access to market: Setting it up in Indonesia provides foreign companies with access to the Southeast Asian market, which has a large and rapidly growing consumer base.

5. Government incentives: Indonesia offers a range of government incentives for foreign companies that invest in the country, including tax exemptions and subsidies for certain industries.

6. Legal and professional services: Indonesia is home to a well-developed legal and professional services sector, which can assist foreign companies with setting up and running their branch offices in the country.

7. Multicultural society: Indonesia is a multicultural society and it is known for its stability and safety, which makes it an ideal location for international business.

8. Economic stability: Indonesia is relatively stable and has a well-developed infrastructure, making it an attractive location for foreign companies looking to establish a presence in the region.