Did you know that Indonesia is one of the countries that allow up to 100% foreign ownership for 35 business sectors? Following this announcement, many foreign companies have taken the chance to make their move to Indonesia to tap into its growing economy.
Setting up a company in Indonesia has become increasingly common as the government aims to attract foreign investors and entrepreneurs with low corporate tax rates.
Why Foreign Companies Relocate to Indonesia?
There are many reasons why foreign companies relocate to other countries, including Indonesia. These reasons include the following:
Economic Conditions
Indonesia is regarded as the largest economy in Southeast Asia. This allows faster growth in gross domestic product (GDP) as well as strengthening fiscal conditions. With a thriving economy, registering and conducting business in Indonesia would be advantageous for expanding businesses.
Operational Costs
The main goal in business is to maximise profits and one way to do that is by minimising costs. Although relocating a business may be a significant expenditure, operational costs are relatively low in Indonesia.
As compared to other countries, labour is relatively cheap; this also encourages many people to relocate their companies to Indonesia, especially service providers as they would need employees.
Another reason why many relocate their companies to Indonesia is because of the relatively low cost of infrastructure in Indonesia which ultimately also reduces operational costs and makes operations more efficient.
Large Consumer Population and Labour Force
Another factor that makes Indonesia attractive is the large population. Businesses in countries with low populations are forced to deal with the challenges of a small market. Furthermore, if the majority of the population is not of working age, the company will also suffer because hiring employees becomes more difficult due to the lack of ready labour.
Neither of these is a problem in Indonesia, as it has a massive population and workforce.
Business Opportunities
With the intention to make profits, it is only possible if the country has business opportunities to offer. In Indonesia, there is a large variation of business opportunities in every industry. This bodes well for entrepreneurs who are searching for an environment in which there are many business opportunities which will benefit their ventures.
How to Relocate Your Foreign Company to Indonesia?
When it comes to relocating a foreign company, the process does not have to be difficult as long as the company owner follows all of the legal requirements. However, although it is not difficult, doing so is often time-consuming. Time that could be dedicated to other areas in business.
For instance, some documentation in Indonesia may take up to six months to be fully processed. Furthermore, the requirement of relocating a foreign company to Indonesia dictates that it may only be done by one who owns a work permit and visa as well as any necessary business registration documents and licenses.
Although possession of a work permit and visa are a requirement for the relocation, the company owner doesn’t need to live in Indonesia just because the owner has chosen to relocate the company to Indonesia.
This is because the owner of the company is permitted to hire a person who will be tasked with managing the company as well as visiting the country and the organisation whenever such may be deemed necessary.
Things to Be Done After Relocation of a Foreign Company to Indonesia
Registration and Licensing
After a company has been relocated to Indonesia, it must then become functional. This can be done by registering the company. No company, whether foreign or local, is allowed to function in Indonesia without being registered. You will need to also apply for any business licenses if required.
Understanding of Laws
Various legal regulations are related to the running of relocated foreign companies. Company owners must understand Indonesian laws to prevent legal violations and protect against illegal acts.
Owners must understand Indonesian laws to avoid violations and protect the company from illegal acts.
Place of Residence
Those who plan to move to Indonesia to run the relocated foreign company will require a place in which they can live. However, the process of settling in Indonesia becomes much simpler if one utilises the help of any of Indonesia’s many real estate agencies.
Laws Governing Foreign Companies Which Have Relocated to Indonesia
Owners of relocated foreign companies in Indonesia must be aware of the laws governing the company. Some of the most important laws that govern relocated companies in Indonesia include the following:
Indonesia Company Law
This is a law that protects the foreign limited liability companies that have relocated to Indonesia. Foreign limited liability companies have a set of roles, duties, rights, and obligations to be followed when conducting business operations in Indonesia. This law also protects foreign companies against any unjust obligations that unscrupulous and dishonest people might attempt to impose upon them.
Investment Law
If foreign companies are not careful, they may end up becoming overtaxed. For relocated foreign companies to ensure that they are not subject to over-taxation while paying their income tax and corporate tax, investment laws are implemented Nevertheless, business owners should understand the taxation rates and system to understand when and how to use the investment law for the benefit of their business.
Capital Market Law
Illegal activities in business are common all over the world; such is also the case in Indonesia. Therefore, capital market laws are enforced to protect foreigners against such activities in Indonesia.
The Indonesian government has been attempting to ensure that the country’s market is not only free for locals but for foreigners as well because they also contribute to the economy of the country. The capital market laws of Indonesia also include certain elements of both the investment laws and company laws alike.
Starting A Business In Indonesia
Relocating a foreign company may cost a business owner much of capital and time. However, once the process has been completed properly, everything will take place in an orderly manner – from the incorporation of your Indonesian company to securing the right type of visa (KITAS) to work and live in Indonesia.
Owners of relocated businesses in Indonesia must ensure compliance with the country’s business laws.
FAQs
Indonesia’s national language is Bahasa Indonesia, although similar to Malay, it is not the same. Other than that, Javanese is also one of the most common primary language spoken. Indonesia is also not an Islamic state although it has own of the largest Muslim population in the world.
Despite Indonesia not being an official Islamic state, Islamic principles do influence political decisions. It also influences the culture in Indonesia, for example modesty in clothing.
Indonesia allows foreigners to set up a foreign limited liability company with up to 100% ownership, although there are some requirements and compliances to follow, it is made easy as there are numerous service providers that can assist with these matters, such as our company Paul Hype Page.
There are a significant number of expats in Indonesia, for education as well as business opportunities. Most significantly in Bali and Jakarta, there is a large community of expats that live there.
Bali is tourist hub that attracts a myriad of tourists and travellers alike to its shores to bask in the sunny beaches. Jakarta is the capital and economic, cultural and financial centre of Indonesia.
The two main states that reaps the most revenue would be Bali and Jakarta. Bali is an island that is popular amongst tourists because of the sights and beaches, along with the variation of foreign businesses that has set up there to appeal to these travellers.
Jakarta on the other hand is the capital of Indonesia. These two states are also widely popular due to their proximity to neighbouring countries such as Malaysia and Singapore. People from these two countries use to frequent to Indonesia during the holidays for a getaway.
The process depends on a case-by-case basis, but it usually takes approximately 1-2 months for a complete registration.
