Opening a Foreign Construction Representative Office
A Step by Step Guide to Set up a Foreign Construction Representative Office in Indonesia.
Construction Representative Office is a representative office established by foreign construction companies to carry out business activities in Indonesia as a construction contractor or consultant. Foreign Construction Service Business Entity (Badan Usaha Jasa Konstruksi Asing) hereinafter abbreviated as BUJKA shall be business entity incorporated under the laws of and domiciled in a foreign country, having representative offices in Indonesia, and deemed equivalent to a Limited Liability Company.
The Foreign Construction Representative Office is only allowed to conduct projects in Indonesia through the Joint Operation with locals. This Joint Operation is only permitted to join the tender and conduct the Government projects funded by the Foreign Aid, projects in the frame of Foreign Investment and Domestic Investment as well as the projects funded by private funds.
What you need to know before setting up a Foreign Construction Representative Office (BUJKA)
Directors and Commissioner
Classification and Qualification Requirements
How to set up Foreign Construction Representative Office (BUJKA) in Indonesia
THE PROCESS OF OPENING A REPRESENTATIVE OFFICE
STEP 1: Legal Status of Foreign Company
Foreign company must obtain a recommendation letter from the embassy of the country of origin in Indonesia stating that the BUJKA concerned is a legally registered and reputable business entity. It is very necessary as the legal status of BUJKA in Indonesia.
STEP 2: Letter of Domicile (Surat Keterangan Domisili Perusahaan)
Obtain a Letter of Domicile of the BUJKA representative office in Indonesia issued by the local Sub-district office (Kelurahan) concerned. In accordance with office locations in Indonesia.
STEP 3: Taxpayer Identification Number (NPWP)
Obtain a Taxpayer Identification Number (NPWP) of the BUJKA Representative Office concerned issued by the tax office in Indonesia. This is required before or after the process of certification and registration.
STEP 4: Certification and Registration of Construction Company
The process of certification and registration of construction service business in Indonesia consists of;
1). Expertise Certificate (Sertifikat Keahlian or SKA),
2). Registration as a member of association of construction company, and
3). Business Entity Certificate (Sertifikat Badan Usaha or SBU).
All these documents is required in order to apply for license of BUJKA in Indonesia. Read more deail
STEP 5: License of Foreign Construction Representative Office
As specified in the Government Regulation of the Minister of Public Work of the Republic of Indonesia No. 10/PRT/M/2014 concerning Guidelines on the requirements for the granting of foreign construction services business entity representative office license, in order to establish a representative office, the foreign construction company (“BUJKA”) shall obtain a business license called the License of Representative Office for Foreign Construction Services (Izin Perwakilan Badan Usaha Jasa Konstruksi/“IUJK”).
The IUJK will only be granted to BUJKA, which is classified as “large” based on the business entity certificate (SBU-Sertifikat Badan Usaha) issued by the National Construction Services Development Board (Lembaga Pengembangan Jasa Konstruksi Nasional/“LPJKN”)
The IUJK valid for three years, and the license can be extended.
After obtaining a business license, the foreign construction representative office or BUJKA may be entitled to;
To undertake construction services and/or engineering consulting activities, the BUJKA must form a joint operation (JO) with an Indonesian construction company (BUJK) to execute either a Government or other projects.
The joint operation contract shall commence as from the participation in the processes of procurement, implementation, up to and including the completion of the construction work concerned.
Criteria of Work
BUJKA shall only be permitted to undertake construction works which have a high level of risk, use high technology and involve high costs.
Value of work
Value of construction work for contractor at least Rp. 100.000.000.000,- (one hundred billion rupiah) and the value of construction work for consultants minimum is Rp. 10.000.000.000, - (ten billion rupiah).
Joint Operation shall be business cooperation between a BUJKA and one or more BUJK, which is temporary in nature for handling one or several construction works and it shall not constitute a new legal entity under Indonesian laws and regulations.
Jane Doe - Another Company, LLC
The advantage of setting up representative offices of
foreign construction companies in Indonesia
No capital requirement
PT. PMA construction is required to have investment plans for at least US$50 million and paid up capital of US$1.000,000. This is not a small amount indeed, and in many cases the investors want to study the market first before making such capital commitments. As representative office you won’t have any capital and therefore the capital requirements don’t apply. For some investors it also means that they won’t have to play with the minimum capital and do everything by the rules.
Promotions & explore the market
A representative office is still allowed to do the promote and secure contracts in its own right on behalf of its principal company and establish contact with Indonesian individuals, companies or Government institutions in an attempt to explore market potential for engineering construction and/or consulting services on behalf of the principal company. In many cases your Indonesian clients will accept it and you can delay opening a PT PMA until you have gained a strong client portfolio.
Undertake construction project
Just like a PT PMA construction company, construction representative office is able to to undertake construction services and/or engineering consulting activities, which include civil, electrical, mechanical and architectural work. The Representative Office must form a joint operation (JO) with an Indonesian construction company to execute either a Government or other projects;