31
May2022
Guidelines for Opening a Foreign Office

Guidelines For Foreign Startups to Open A Branch Office in Indonesia

The increasing investment climate has facilitated the growth of start-up companies, including information technology-based ones, in Indonesia. At present, the Indonesian government not only facilitates domestic information technology-based startups, but also foreign information technology-based startups aiming to expand their business in the country.

This article was written to guide foreign information technology-based startups engaged in Electronic System Trading, known locally as Perdagangan Melalui Sistem Elektronik or PMSE),  to be able to operate legally in Indonesia.

Organizers of Trade Through Electronic Systems (Penyelenggara Perdagangan Melalui Sistem Elektronik/PMSE)

Based on Article 1 number 2 in Government Regulation Number 80 of 2019 on PMSE (PP Number 80 of 2019), PMSE is trade whose transactions are carried out through a series of electronic devices and procedures. Government Regulation Number 71 of 2019 on Private Scope Electronic System Operators (PP Number 71 of 2019) states that PMSE; which includes the Implementation of Electronic Systems which is carried out by People, Business Entities, and the public; is subject to the provisions in PP Number 71 of 2019.

Licensing of Trade Through Electronic Systems

Every business operation in Indonesia must comply with applicable laws and regulations, including the implementation of foreign PMSE in Indonesia. The Indonesian government has facilitated the licensing process for Electronic System Operators , or known as PSE, through the use of the online single submission portal.

Every Private Foreign PSE operating in Indonesia needs to obtain a Business Identification Number (Nomor Induk Berusaha or NIB) and an Electronic System Operator Registration Certificate (Surat Tanda Terdaftar Penyelenggara Sistem Elektronik or TDPSE) before it starts operating in Indonesia.

NIB is a document that identifies every business operating in Indonesia and TDPSE is an evidence that an electronic system operator has been registered to operate in Indonesia.

Based on PP Number 71 of 2019, the requirements for obtaining NIB and TDPSE of Foreign PSE in private scope are as follows:

  1. Identity of the Person in Charge of Electronic Systems in Indonesia;
  2. Corporate Identity;
  3. Identity of the Electronic System and Its Description;
  4. Descriptions related to the Personal Data in the Process; and
  5. The number of users and total transactions originating from Indonesia for one year.

If the number of users and the number of transactions have met certain criteria, there are other obligations below that need to be fulfilled by the Company.

Representative Office of Foreign Trade Company in PMSE (KP3A for PMSE)

Regulation of the Minister of Trade Number 50 of 2020 on Provisions for Business Licensing, Advertising, Guidance, and Supervision of Business Actors in Trading Through Electronic Systems (Permendag Number 50 of 2020), states that overseas PPMSE is required to establish KP3A in Indonesia after fulfilling the criteria based on Article 15 paragraph 2, namely:

  1. have made transactions with more than 1,000 consumers in a one-year period; and/or
  2. has delivered more than 1,000 packages to consumers in a one-year period.

Based on Article 1 number 24 of Permendag Number 50 of 2020, the Representative Office of Foreign Trade Companies in the field of Trade through Electronic Systems (KP3A) in the field of PMSE is an office headed by 1 (one) or more individual Indonesian citizens or foreign nationals appointed by the Foreign PMSE Operator as its representative in Indonesia.

After going through an assessment and being declared to fulfill certain criteria by a team formed by the Minister, foreign PPMSE is required to show a representative domiciled in Indonesia. This representative acts as and on behalf of PPMSE abroad in the management of its business operations in Indonesia, such as consumer protection, reporting to agencies, and so on.

KP3A as a representative of foreign PPMSE can only represent one foreign PPMSE. KP3A of PMSE can open a branch office, but with the approval of the foreign PPMSE it represents.

In its establishment, KP3A of PMSE requires the following documents:

  1. Statement letter from the trade attaché
  2. Letter of Intent, namely the establishment of KP3A in Indonesia
  3. Letter of Appointment, namely the Appointment of the Head of KP3A Office in Indonesia
  4. Letter of Statement, namely the Establishment of KP3A in Indonesia
  5. Identity of the Head of Office
  6. Corporate Identity

In addition, KP3A is required to have a Business License for Representatives of Foreign Trading Companies (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing or SIUP3A) in the sector of PMSE based on Article 1 Number 16 of Permendag Number 50 of 2020.

There are several types of SIUP3A depending on the functioning of the representative office;

  1. Temporary SIUP3A that is valid for 2 months from the date of issue
  2. SIUP3A for Head Office that is is valid for 1 year from the date of issue
  3. SIUP3A for Branch Offices & on-g0ing SIUP3A that is valid for up to 3 years from the  issuance date unless otherwise stated in the letter of appointment

Proof of appointment and recording of the Articles of Association of foreign PPMSE must be translated to Indonesian. In addition, Article 26 Paragraph 5 of Permendag Number 50 of 2020 requires proof of appointment, or at least contains the authority,  of KP3A  of PMSE to represent foreign PPMSE, namely:

  1. Fulfilling consumer protection obligations;
  2. Conducting coaching to improve competitiveness; and
  3. Dispute resolution.

In addition to these requirements, Permendag Number 50 of 2020 also requires KP3A of  PMSE to submit a Registered Certificate of Electronic System Operator on behalf of foreign PPMSE. Based on Article 27 of Permendag Number 50 of 2020, the letter is issued by the authorized agency within a period of no later than 14 working days, calculated after the SIUP3A in the PMSE field is issued.

 

Author / Contributor:

M. Ihsan Abdurrahman S.H.

Associate

Contact:

Mail       : ihsan@siplawfirm.id

Phone    : +62-21 799 7973 / +62-21 799 7975

 

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