Many foreigners have made plans to start a business in Indonesia. However, some of those who plan to do so have been wondering about the laws which govern foreign business ownership in the country. Therefore, it is important that they be aware of all of the surrounding legal matters.
Indonesia’s burgeoning economy and increased level of purchasing power among the people living there have made it a viable location in which many foreign entrepreneurs have chosen to start a business. However, all foreign business owners in Indonesia are to abide by the country’s many business laws. Of these laws, several specifically apply to foreign business owners and the business activities in Indonesia which they conduct.
Business Entities Allowed to Be Started by Foreigners in Indonesia
Indonesian business laws specify the business entities in Indonesia which may be started by foreigners. Under the usual circumstances, these business entities are the foreign-owned company (PT PMA) and the representative office. PT PMAs are typically started by those planning to engage in business activities in Indonesia. The PT PMA’s business activities must be related to the sector of which it is a part. Such business activities must also be approved by the Indonesian Investment Coordinating Board (BKPM), while the minimum amount of capital required to establish a PT PMA is 10 billion rupiah of which 25% of the total must be paid-up capital. On the other hand, representative offices which are set up in Indonesia are barred from conducting any business activities there. Representative offices in Indonesia are only to exist for purposes such as networking and market research. For this reason, no profits or revenue may be generated by a representative office in Indonesia. However, it should also be noted that there are no minimum requirements with regard to either total or paid-up capital which apply to representative offices.
It is also possible for a foreigner to establish a locally-owned company (PT) in Indonesia. Ordinarily, such could not be the case. However, foreign business owners may do so through the employment of nominee directors, commissioners, and shareholders. The primary advantage of doing so lies in the fact that the foreign business owner will be allowed to bypass the requirements which have been specified in the Negative Investment List. However, one notable drawback of doing so is that the details of the company’s shareholding are likely to become much more uncertain; some PTs which are actually owned by foreigners do not even have any of their most information available in the public register. For this reason, it may sometimes be difficult for the authorities to monitor the business activities of a PT owned by a foreigner.
Negative Investment List Requirements
The Negative Investment List specifies many of the ownership requirements to which business owners in Indonesia must adhere. The Indonesian government introduced the Negative Investment List as a way to protect the business interests of Indonesian business owners. The Negative Investment List mentions which business sectors in Indonesia are allowed to have businesses with complete foreign ownership, which sectors may have businesses with partial foreign ownership and to what extent, and which sectors are barred from having any foreign ownership at all.
Approval from Specific Authorities
Certain authorities in Indonesia are to provide official approval to a foreign business owner before the business can be established and operated. These authorities include the government through any ministries which are related to the business in question, the BKPM for licensing purposes, and the governing body which oversees businesses in the business sector of the company to be established. The government of Indonesia has created the Online Single Submission (OSS) system in order to expedite this process.
Any foreign business owner in Indonesia who strictly follows each of these requirements and runs the business in the most suitable manner possible is certain to experience much success while running the business. Therefore, it you are interested in doing so, let us at Paul Hype Page & Co offer you our services. Our incorporation services in Indonesia are recommended by many and will certainly ensure that your business ownership and operations will cause your business to flourish in due time.