The business world of today has become more globalized and internationally driven than ever before. Many business owners have expanded or relocated to other countries because they believe that doing so will give them significant advantages. Even business owners who choose to remain in their own country must often conduct business activities with their foreign counterparts in order to maximize the profitability and economic viability of their business. The interactions and subsequent results of such international business activities will undoubtedly serve to improve the status of all businesses involved.
Conducting Business Activities Through Subsidiaries
Many foreign company owners in Indonesia choose to set up a subsidiary of their existing foreign company there. A subsidiary is a business entity which is controlled by a larger and more powerful foreign company. This foreign company may be referred to as either a parent company or a holding company. Foreign business owners typically set up subsidiaries in order to establish a more significant presence within the Indonesian market. A subsidiary owned by a foreigner will be set up as a foreign-owned limited liability company (PT PMA). It will also be deemed to be a tax resident company of Indonesia and therefore taxed at the standard corporate tax rate of 25%.
In certain situations, the owner of a foreign-owned subsidiary must interact with local Indonesian business owners. This is because before the subsidiary is operational, there are many tasks to be completed. These include matters such as applications for licenses, registration, hiring of employees, budgeting, management of payroll, and many others. As foreigners may sometimes find the handling of these matters somewhat complex if they are not used to the existing systems governing such important matters to be settled, they may sometimes work alongside Indonesian companies which provide services to simplify and expedite the processes of completing each required task. Furthermore, after the subsidiary has been established, local company owners may choose to engage in business dealings with the foreign owner of the subsidiary; such dealings often lead to beneficial outcomes for both parties.
If you are interested in starting a subsidiary or any other business entity in Indonesia, we at Paul Hype Page & Co are always ready and willing to assist. Our incorporation team will work with you to help you discover the most suitable ways through which you may set up your own Indonesia-based business. We will ensure that your business will be set up in such a way that future success will be likely.