Entering and setting up a company in Southeast Asia’s largest economy is one of the top draws for investors, whether locally or internationally, despite the pandemic. Indonesia has been steadily growing as a destination with the growth of the middle class, free trade agreements, and opportunity to own land.

With 90 million Indonesians expected to be part of the middle class by 2030, consumerism will rise, opening doors for businesses to set foot into the country.

Business Opportunities in Indonesia 2021

While the pandemic has dampened and slowed down the country’s economic growth, there are still business opportunities that companies and entrepreneurs can tap into. The three sectors that have shown potential for growth in 2021 and beyond are:

1. Healthcare and Pharmaceuticals

The pandemic has brought a focus to healthcare, with more individuals putting the onus on them to take care of their health. With this new emphasis and the introduction of the Positive Investment Lists, foreigners can own 100% of the shares in the following healthcare and pharmaceutical companies:

  • Hospitals with more than 200 beds
  • Manufacturing of pharmaceuticals
  • Wholesale healthcare and pharmaceutical products

2. Digital & E-Commerce

Did you know that Indonesia is experiencing a digital boom and that the government has pushed for digital transformation? With the digital economy expanding by 11% to US$44 billion from US$40 billion in 20219, it is a great time for investors to set up a digital or e-commerce company.

Some of such companies include:

  • Cloud kitchen services
  • Delivery services
  • Digital wallets

3. Manufacturing

The manufacturing sector in Indonesia is one of the biggest contributors to its economy at an estimated 20%. With the year-on-year growth of 4% since 2016, it presents a lucrative opportunity for investors to start a manufacturing business.

Here are some of the potential sectors for your manufacturing and production business:

  • Electronics
  • Automotive
  • Chemicals
  • F&B

What are the Types of Entities You Can Set Up in Indonesia

Before you start a company in Indonesia, it is important to know the types of business entities that you can set up in the country.

Types of Business EntitiesDescription
Local Company/ Perseroan Terbatas (PT)
  • Also known as a limited liability company
  • Only local entrepreneurs are allowed to incorporate this business entity
  • One of the most common business entities in Indonesia
  • Divided into 3 business scales: Small, Medium & Large

NOTE: While a PT company is mainly for locals, foreigners usually set up a PT company under a local nominee arrangement.

Foreign-owned Company/ Penanaman Modal Asing (PMA)
  • Wholly or partially foreign owned limited liability company
  • Governed by the Foreign Capital Investment Law
  • Approval is required by the Capital Investment Coordinating Board
  • Only selected sectors are allowed to operate under PT PMA
Representative Office (KPPA)
  • Branch of an overseas parent company
  • Objective of a KPPA is to conduct marketing research to analyse suitability of the country for the company
  • Not allowed to issue sales invoices
  • Allowed to operate for up to 2 years
  • Allowed to apply for a KITAS (link to KITAS article) under a KPPA for the Chief Representative Officer if he is a foreigner
  • Able to open an Indonesian company bank account for expenses

TIP: KPPA’s usually conduct marketing efforts and when there are sales enquiries, they will redirect to parent companies for payment and invoicing.

What are the Requirements to Set Up an Indonesian Company

For each type of business entity, there are certain set of requirements that the company has to fulfil before incorporation.

Business EntitiesRequirements
PT
  • 2 local shareholders
  • 1 director
  • 1 commissioner
  • Projected investment value:
  1. Small-scale business: IDR 50 million
  2. Medium-scale business: IDR 500 million
  3. Large-scale business: more than IDR 10 billion
  • Virtual offices are allowed to be used as a registered business address
PT PMA
  • 2 shareholders
  • 1 director
  • 1 commissioner
  • Min. value of investment plan for each business activity is IDR 10 billion
  • Local registered address in a commercial building
KPPA
  • Must employ at least 1 chief representative officer
  • Chief representative officer cannot be director
  • Local registered address in a commercial building

Documents Required to Set Up a Company in Indonesia

The documents required for PT and PT PMA are the same, although for KPPA, there have a set of different documents that you will have to provide.

Business EntitiesDocuments
PT & PT PMA

(Foreign & Local Legal Body and Personal Foreigner)

Company Documents

  • Power of Attorney for submission document signed by each shareholder
  • Shareholder documents
  • Rental agreement between the company & building management
  • Original building domicile/statement from the building management
  • Building & land tax receipt (PBB) including the payment approval of current year
  • IMB or certificate of ownership if the building is owned
  • Statement for lease (if any)
  • Min. 3 office photos – reception, signage of company & office room with business activity
  • Statement of domicile issued by the company & acknowledged by the building management
  • Company letterhead & copy or sample design of the company stamp

Shareholder Documents

  • Copy of Article of Association and its amendment – in English r Bahasa Indonesia
  • Business registration certificate
  • Board of Directors structure

Personal Documents – Directors & Commissioners

  • Foreigner: Copy of coloured passport with a min. 18 months validity and 4 blank pages
  • Local: ID card (KTP & Taxpayer Identity Number)
  • Family card (KK)
  • Indonesia visa stamp
  • Residence of hotel or apartment domicile letter for the director
  • Recent passport-sized photo with red background for each Board of Director

NOTE: Edited photos are not accepted.

KPPACompany Documents

  • Article of Association from the holding/ parent company with the Board of Director structure, shareholder, registered address, and business field
  • Letter of Appointment (LoA) signed & sealed by the director of the holding/ parent compnay
  • Letter of Statement (LoS) from proposed Chief Representative Officer (CRO) that he/she accept the position as CRO, signed & sealed with stamp duty (Material 6000) if the letter is signed in Indonesia
  • Letter of Intent (LoI) signed & sealed by the holding/ parent company
  • Letter of Reference (LoR)
  • Original building domicile/statement from the building management
  • Building & land tax receipt (PBB) including the payment approval of the current year
  • IMB or certificate of ownership if the building is owned
  • Statement for lease (if any)
  • Min. 3 office photos – reception, signage of company & office room with business activity
  • Statement of domicile issued by the company & acknowledged by the building management
  • Company letterhead & copy or sample design of the company stamp

Chief Representative Officer Documents

  • Foreigner: Copy of coloured passport with a min. 18 month validity and 4 blank pages
  • Local: ID card (KTP & Taxpayer Identity Number)
  • Family card (KK)
  • Indonesia visa stamp
  • Residence of hotel or apartment domicile letter for the CRO
  • Recent passport-sized photo with red background

NOTE: Edited photos are not accepted.

The shareholder documents vary for each type of PT PMA company, whether foreign legal body, local legal body, or a personal foreigner. These documents are listed below:

Business EntitiesShareholder Documents
PT PMA – Foreign Legal Body
  • Copy of Article of Association and its amendment – in English or Bahasa Indonesia
  • Business registration certificate
  • Board of Directors structure
PT & PT PMA – Local Legal Body
  • Copy of Article of Association and its amendment – in English or Bahasa Indonesia
  • Copy of company taxpayer identity number (NPWP)
  • Copy of Domicile Letter from sub-distrcit (Dominisili Kelurahan)
  • Copy of Business License (SIUP/NIB)
  • Copy of Company Registration Certificate (TDP/NIB)
  • Copy of KTP & NPWP for each Board of Director
  • Copy of passport for any foreign Board of Director
PT & PT PMA – Personal Foreigner
  • Copy of coloured passport with a min. 18 months validty and 4 blank pages

Procedure to Incorporate an Indonesia Company

There are 6 steps for company incorporation in Indonesia, which will take approximately 1-2 months for a complete registration.

Step 1: Apply for a company name

Check your desired company name is available – you can use our free company name checker to do so! If the name is available, you may proceed to apply and register for your desired company name with the Ministry of Law and Human Rights.

NOTE: The approval usually takes 1 working day and you will receive a unique code that allows you to reserve the name for a maximum of 60 days.

Here are some tips when choosing a company name. Do not select names that:

  • Are similar to existing companies
  • Are identical or similar to any name of a state, government, or an international agency without official approval
  • Does not conform to the purposes/ objectives/ activities of the company
  • Consist of a set of numbers, letters, or figures that do not form any words

Step 2: Apply for Deed of Establishment

The Deed of Establishment is to be applied online, together with the submission of the certificate of the bank account and official copy of the bank transfer advice. If the application is successful, you will receive a legalisation on the establishment of the company and can announce the establishment within the following 14 days.

Step 3: Apply for the Certificate of Company Domicile

The next step is to apply for the Certificate of Company Domicile where all Indonesian limited liability companies are required to hold.

FUN FACT: This certificate is very important in the application of other documents!

Step 4: Obtain a tax registration number (NPWP)

After getting your Certificate of Company Domicile, you will need to obtain a valid tax ID for financial purposes with the local tax authority. The documents required for this application include:

  • Deed of Establishment
  • Identity card of the director
  • Statement letter to confirm place of business

Step 5: Get your business identification number (NIB)

The NIB is obtained from the Online Single Submission. This is a unique number that is assigned to your company as a form of identification (like an identification card!).

Step 6: Apply for other relevant documents and licenses

Different types of businesses require various business licenses. Depending on the nature of your business, you will need to apply for licenses before you are allowed to start your operations.

Challenges You May Face as a Foreign Entrepreneur in Indonesia

During the incorporation process, you may face some challenges, especially as a foreign entrepreneur. Some of these challenges include:

1. Regulations

There are many regulations in Indonesia with new regulations and changes to existing regulations a common feature in the country. To keep up with these changes, it is recommended that a company hires a trusted incorporation and tax partner for a smooth incorporation process.

2. Opening a company bank account as an expat

When opening a corporate bank account in Indonesia, there are different rules and requirements, depending on the banks. This may be confusing for a first-time foreign entrepreneur to assess which bank is best suited for the business.

3. Obtaining work permits

In order to live and work in Indonesia, one has to have a valid working permit and KITAS. The Indonesian government has imposed strict employment limits on foreign workers, making it more difficult to obtain such permits to bring foreign talents from other countries.

4. Limited number of sectors

The Indonesian government has recently issued the new positive investment list, which replaces the negative investment list. For the new list, the number of restriction sectors was reduced from 350 to 46. However, there are still certain sectors that a foreign entrepreneur could not invest in.

TIP: Before you think of what business or sector you’d like to set up, do check for the positive investment list here!

Setting up an Indonesia company can be difficult. Reach out to us for a free consultation for your incorporation and other corporate needs from taxation to visa application!

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FAQs

What is an Article of Association?2021-09-27T14:44:16+08:00

Articles of association form a document that specifies the regulations for a company’s operations and defines the company’s purpose. The document lays out how tasks are to be accomplished within the organisation, including the process for appointing directors and the handling of financial records.

What is the latest update on the Positive and Negative Investment List?2021-09-27T14:43:45+08:00

As of 4 March 2021, the Positive Investment List was introduced to significantly reduce the number of restricted sectors that prevents foreigners to enter from 350 to 46.

What is the Positive and Negative Investment List?2021-09-27T14:42:53+08:00

The Negative Investment List was replaced by the Positive Investment List in 2021. The list details the restricted sectors that the government prohibits investors and entrepreneurs to invest in.

Can I set up a foreign local company?2021-09-27T14:41:49+08:00

Yes, you can. You will need a local nominee director for your foreign local company incorporation.

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