Indonesia’s corporate environment has been becoming one of the better ones in the Southeast Asian region with regard to starting a business. Its improving economic status has contributed to its increasingly vibrant corporate scene. This in turn has led many people, both locals and foreigners, to make plans to start a business there because in the current business climate in Indonesia, they would be likely to make a profit.
Many of the people who choose to start a business in Indonesia are foreigners. They believe that starting a business in Indonesia would yield a greater return on investment than doing so in their home countries. There are two methods by which a foreigner may start a business in Indonesia. One of these is by starting a Perseroan Terbatas (PT) and employing a nominee director; the other is by starting a Penanaman Modal Asing (PMA). The details of each method will be discussed in the following paragraphs.
Perseroan Terbatas (PT)
A PT is a business entity based in Indonesia which is formed according to and operates under Indonesia’s business laws. PTs only exist in the Netherlands, Belgium, and former Dutch colonies; as Indonesia was once a Dutch colony, PTs thus exist there. In Indonesia, PTs typically receive investments from abroad. The types of PT which exist in Indonesia are the general public, domestic, individual, closed, foreign, and open PT. Of these, the general public and open PTs are by far the most common.
Anyone who decides to invest in a PT will only be liable for the amount of money spent during their initial investment. Those who seek further clarification on this matter may consult either the PT’s Articles of Association. The Articles of Association also specify the details about the distribution and ownership of the PT’s shares.
The business laws of Indonesia mention which businesses have legal permission to be operated as PTs. The laws and regulations which govern the business activities of PTs differ across the country; this is because each region of Indonesia has its own laws for this purpose. Licensing requirements for each PT also differ; this is due to the fact that the business activities of the PT in question determine the license which is needed and therefore the criteria to be fulfilled in order to receive one.
PTs typically have relatively low paid-up capital requirements. They are also not restricted by the specifications mentioned in the Negative Investment List. PTs may receive additional funds and capital by issuing new shares; this is a rather simple and understandable method. An additional advantage is the fact that it may have as many business licenses as its owner desires without a need to pay any additional paid-up capital.
How Foreigners May Start a PT
A PT is not allowed to have any shareholders who are foreigners. It must also be completely owned by locals. Thus, it is impossible for a foreigner to start a PT via conventional means. However, there is a way by which this restriction can be bypassed, thus allowing a foreigner to do so. This way involves the use of a local nominee director. A foreigner who uses a local nominee director during the setup of the PT will not be registered as the owner of the company.
However, before the prospective foreign owner of the PT may attempt to start the company, a corporate bank account must be opened. In this case, the corporate bank account must be one which is based in a foreign country. This way, despite the fact that the foreign owner is not to be regarded as the company’s legal owner, the foreign owner will still be able to manage the PT’s funds through this foreign bank account.
At this point, the hiring of a local who will serve as the PT’s nominee director is to take place. Once this has been done, a minimum of two local nominee shareholders and one commissioner are to be selected. The local nominee shareholders will be officially registered as the people who hold the company’s shares. After the selections are made, the foreigner will have completed the process of the setting up of a PT.
If you are a foreigner who is interested in starting a PT in Indonesia, we at Paul Hype Page & Co are able to assist you in the matter. We will work with you to help you understand everything that needs to be done before, during, and after the setup of the PT. We will even contact relevant government authorities on your behalf if such is necessary.
Penanaman Modal Asing (PMA)
A PMA is a business entity which is unique to Indonesia; it does not exist in any other country. A PMA may either be partially or fully owned by one or more foreigners. Unlike representative offices connected to foreign companies, PMAs may receive licenses which allow them to conduct any of a variety of business activities in Indonesia.
PMAs have the same liabilities and rights as do most other companies in Indonesia. A PMA must be owned by a minimum of two company owners; these owners are to be legal entities, individuals, or a combination thereof. At least one owner has to be a foreign individual. Similar to a PT, a PMA is to have a director and a commissioner.
One important advantage of a PMA is its openness to foreign investment; locals and foreigners alike may invest in one. A PMA also enables those who have invested in it to conduct business activities. Unlike a PT, a PMA may hire foreigners. However, a permit must be obtained by the owner of the PMA before foreigners may be hired.
It should also be noted that the cost of starting a PMA is relatively high. A minimum of 10 billion rupiah’s worth of paid-up capital must be paid before one can be started. Of this paid-up capital, 25% of it is to be paid to the Indonesian government before registration can take place. Another regulation regarding PMAs is that of business sectors. In Indonesia, all businesses are part of open sectors, open sectors with conditions, and closed sectors. According to the Negative Investment List, open sectors are sectors in which businesses may be completely owned by foreigners. Open sectors with conditions are sectors in which foreign-owned companies and foreign investment in such companies are permitted if certain criteria are fulfilled. Closed sectors completely forbid foreign involvement.
How Foreigners May Start a PMA
Starting a PMA is the more common method by which foreigners start a business in Indonesia. There are a total of seven steps to be completed before a PMA can be fully formed.
The first step is that of company name approval. This is to be done via the Ministry of Law and Human Rights and takes approximately two days to be completed. Once this has been done, approval of a principal license is required. The Indonesian Investment Coordinating Board (BKPM) approves all principal licenses in Indonesia; it takes the BKPM around 14 days to do so. Articles of Association for the PMA are also necessary; a notary must be present when they are created. This step typically requires four days for completion. After the Articles of Association have been created, they are to be submitted to the Ministry of Law and Human Rights for ratification. Ratification normally takes around three days to take place. The next step is that of obtaining a Certificate of Domicile from the office building’s landowner and the authorities of the sub-district. This certificate mentions the company’s address and takes approximately three days to be obtained. The company will next need a Taxpayer Registration Number (NPWP) and a letter of tax registration (SKT). These can be received in a tax office located in the sub-district from which the PMA will be operating. It takes around three days for a PMA to receive its NPWP and SKT. There is one final step to be completed; it is the receiving of a company registration certificate (TDP). It is provided by the government of the province in which the PMA is to be located. This certificate officially registers the company. Approximately 10 days are required for the completion of this step. In total, the entire process takes around 39 days to be completed if no further complications arise.
We at Paul Hype Page & Co are able to serve you if you happen to be a foreigner who is interested in starting a PMA. We will ensure that all the steps of the registration process are completed in the proper and legal manner. We will even help you create a financial plan for your PMA so that it will not face financial difficulties after it has been incorporated.
The benefits which a foreigner may receive through starting a business in Indonesia are plentiful and obvious. Foreigners who complete all the necessary processes and fulfill all the criteria required for the setup of a business in Indonesia will soon discover that their decision will have proven to be one which will generate much revenue for all involved. Foreign-owned companies contribute much to the Indonesian economy, and each new one only serves to strengthen the country’s business environment.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia
Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.
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Step 1- Listen to your Business plan and Relocation needs.
Step 2- Analysis your Tax Planning
Step 3- Recommend the most suited type of Company Incorporation, Open Bank account and Work Visa
Step 4- Arrange for your Spouse and Children Visa
Step 5- Assist as your company to hire staffs and handle all HR matters
Step 6- Every financial year end, we assist you with your yearly OSS Finanical and Tax Complianc
Step 7- Assist you to expand business to Malaysia, Indonesia, Vietnam and Thailand.
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