Indonesia has been an emerging market for many years and many business owners have incorporated their companies in the country. With every incorporation or a new business venture, there are bound to be some unsuccessful ones.
In such cases, there are two options:
A dormant company is one that has ceased to operate and does not have any records of transactions in its financial books dating back to a specific period. According to other business experts, a dormant company in Indonesia is considered inactive by the tax authorities in terms of taxation regulations.
Dormant companies in Indonesia, according to the information stated in Article 146 of Law Number 40 in 2007 about limited liability companies (PT PMA), are companies that are:
- Unable to continue operations because they have been non-active
- Have not conducted any business for the previous 3 years, as reported to the tax office
The tax authorities in Indonesia define the company as a non-active taxpayer if the company fulfils the following criteria:
Why and How Businesses Become Dormant Companies in Indonesia?
Businesses become dormant companies in Indonesia due to many factors, including the situation and, in some circumstances, the decision of business owners. The following are some of the reasons why a business could go out of business or be a dormant company in Indonesia:
Companies can only be designated as inactive if they follow the norms and regulations of the Indonesian company or tax legislation.
In any event, if the shareholders decide to dissolve or end the business, the firm’s business operations must cease in order for the company to be classified as inactive. The company has to:
- Fire all of its employees
- Keep only the administrative personnel
- Save only the most important tax documents
Consequences of Being a Dormant Company in Indonesia
The District Court has the authority to inflict legal repercussions on a dormant company in Indonesia. According to Article 146.1. (c) of the Indonesian Company Law, the Court can dissolve the company if requested by:
- The directors
- Board of commissioners
Dormant companies in Indonesia must comply with Indonesian accounting and tax rules, which require them to:
In addition to these responsibilities, the tax office must submit a few applications in order for the firm to be declared dormant. This is likely to be approved within 10 working days. If a corporation has not submitted:
- SPT Masa or SPT Tahunan report
- Monthly tax report
- Has not paid any administrative penalty, the tax authorities should not issue tax warning letters.
A few legal requirements instead of the tax report that dormant companies in Indonesia must fulfil include the following:
How to Dissolve a Dormant Company in Indonesia?
If a corporation decides to stop doing business in Indonesia, it does not lose its legal entity status instantly. It must take specific actions before liquidating the firm. The following steps can be used to dissolve a dormant company in Indonesia:
You first need to tell your Corporation Tax office, clients and agents that you’ll no longer be trading. You’ll also have to chase any unpaid invoices and prepare final accounts up to the usual financial year end.
Non-trading (dormant) companies do not require a bank account because no money is being spent or generated by the business; therefore, no financial transactions are taking place that require entry in the company accounts.
As a company can remain dormant indefinitely so long as it meets certain requirements, you could set the company up a few months or even years before starting to trade.
In common parlance, the word “Dormant” means inactive or inoperative. A dormant company is an excellent opportunity to start a company for a future project or hold an asset/intellectual property without having significant accounting transactions.