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Test Dormant Companies in Indonesia

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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:

  • Dissolve the company where the company ceases to exist

  • Keep the company dormant

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 certain time period. According to several 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 or have not conducted any business for the previous three years, as reported to the tax office via notification letter.

The tax authorities in Indonesia define the company as a non-active taxpayer if the company fulfills the following criteria:

  • The domicile of the taxpayer is not known

  • For three years in a row, taxpayers have been unable to meet their tax requirements, which include either paying the tax or filing the periodic tax return, also known as SPT Masa, or the yearly tax return, also known as SPT Tahunan

  • There is full cessation of every kind of business activity

Why and How Companies Become Dormant in Indonesia?

Companies in Indonesia might go dormant 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:

  • Reduced market demand for the company’s products and services; thus, being dormant would mitigate any potential losses due to a negative client response

  • The company has failed to observe market trends, competition markets, or client demand, and is instead rapidly growing their market without conducting thorough research

  • The proprietors established the corporation to monitor business activity but not to engage in any actual business

  • As stated in the Investment Registration Approval for foreign investment businesses, foreign investors are preparing for projects and construction connected to the company

  • Companies that are losing money or are about to go out of business opt to become inactive.

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, and save only the most important tax documents.

Consequences of Being a Dormant Company in Indonesia

The Indonesian District Court has the authority to inflict legal repercussions on a dormant company. According to Article 146.1. (c) of the Indonesian Company Law, the Court can dissolve the company if the directors, board of commissioners, and shareholders request it.

Dormant companies must comply with Indonesian accounting and tax rules, which require them to:

  • Appoint commissioners and directors on a regular basis, according to their periods of office

  • Organising the shareholders’ Annual General Meeting to endorse the Board of Directors’ annual report

  • Investment reports and firm information updates must be submitted to the BKPM

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 the SPT Masa or SPT Tahunan report, or the monthly tax report, and 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 must fulfill include the following:

  • Dormant companies in Indonesia persist because they are not doing any financial transactions but have not yet been totally disbanded. They keep paying their taxes.

  • Under the yearly return filed by the corporations, these companies must submit a tax return known as Surat Pemberitahuan that is connected to corporate income tax or value-added tax. Unless the court grants an exemption or the firm is dissolved, it is required to pay taxes on a regular basis.

  • In any event, if the compnay fails to pay the taxes, the Ministry of Finance laws stipulate that there would be no sanctions.

  • Annual audits are not required for dormant firms. This is true for businesses that have been dormant since their formation or until the conclusion of the preceding fiscal year.

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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 an inactive corporation:

  • The shareholders, the Board of Directors, and the Board of Commissioners must submit a request for the company’s winding up.

  • The liquidator, who is usually the Company’s Director, is appointed at the General Meeting of Shareholders to seek the liquidation process.

  • The liquidator must publish notice of the PT PMA Company’s or the Dormant Company’s liquidation in the Republic of Indonesia’s State Gazette as well as in a newspaper. This notification must be issued within 30 days of the Shareholders’ General Meeting. If any lenders or creditors owe money, they have 60 days from the date of the notification to claim their obligations.

  • The liquidator must submit to the Ministry of Law and Human Rights the approval form for the company’s winding up. The corporation is deemed dissolved after the Ministry approves its dissolution.

  • When the inactive company’s dissolution is announced, the asset division choice must be made as well.

  • The shareholders must confirm the split of the Company’s assets after another 60 days have passed.

  • The liquidator must seek authorization from the Ministry of Law and Human Rights to distribute the assets once again. The liquidation procedure is completed at this point, and the corporation loses its legal standing in the nation.

  • The last step is to publish a public notice that the company’s dissolution procedure has been completed. This notice informs you about the company’s non-existence or the company’s decision to cease operations in Indonesia.

Thinking of setting up a company in Indonesia or require corporate secretarial services? Reach out to us for a free consultation today.

FAQs

Bisakah saya membuat Perusahaan LTD saya tidak aktif?2022-06-22T14:04:27+08:00

Pertama-tama Anda harus memberi tahu kantor Pajak Perusahaan, klien, dan agen Anda bahwa Anda tidak akan lagi berdagang. Anda juga harus mengejar faktur yang belum dibayar dan menyiapkan akun akhir hingga akhir tahun keuangan seperti biasanya. 

Bisakah perusahaan yang tidak aktif memiliki rekening bank?2022-06-22T14:04:45+08:00

Perusahaan non-perdagangan (tidak aktif) tidak memerlukan rekening bank karena tidak ada uang yang dikeluarkan atau dihasilkan oleh bisnis; oleh karena itu, tidak ada transaksi keuangan yang memerlukan entri dalam rekening perusahaan. 

Berapa lama perusahaan bisa tidak aktif?2022-06-22T14:05:00+08:00

Karena perusahaan dapat tetap tidak aktif tanpa batas selama memenuhi persyaratan tertentu, Anda dapat mengatur perusahaan beberapa bulan atau bahkan bertahun-tahun sebelum mulai berdagang. 

Apa yang dimaksud dengan perusahaan yang tidak aktif?2022-06-22T14:05:13+08:00

Dalam bahasa umum, kata “Dormant” berarti tidak aktif atau tidak beroperasi. Perusahaan yang tidak aktif adalah peluang bagus untuk memulai perusahaan untuk proyek masa depan atau memegang aset/kekayaan intelektual tanpa memiliki transaksi akuntansi yang signifikan. 

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To incorporate a company in Indonesia, you must appoint at least one director and one commissioner. The director manages daily operations and makes critical business decisions, while the commissioner provides oversight, ensuring the company complies with Indonesian laws. Both roles are mandatory for legal incorporation, and they work together to ensure the smooth functioning of the business.

The director must be qualified and, in some cases, meet residency requirements, especially for foreign-owned companies. The commissioner, though not involved in daily management, is responsible for guiding the company towards compliance and proper governance.

Opening a corporate bank account is essential when incorporating a company in Indonesia. After incorporation, you must deposit your paid-up capital into this account. Once your company is officially registered, you can start operating as a legal entity. However, there are additional steps to complete:

Within 30 days, you must submit the labor report and other required documents to the Ministry of Labor. Additionally, you must enroll your employees in Indonesia’s social security programs, which cover workplace accidents, retirement, pension, and death benefits. It’s also mandatory to secure healthcare and employee welfare insurance through the Badan Penyelenggara Jaminan Sosial (BPJS).

Essential Work Visas for Foreigners Relocating to Indonesia

Work KITAS (Limited Stay Work Permit)
The Work KITAS allows foreign employees to legally live and work in Indonesia. It is sponsored by the employing company and valid for the length of the employment contract.

Single-Entry Business Visa
Ideal for short-term business visits, this visa is valid for 60 days and can be extended, allowing up to 180 days in total. It’s perfect for attending meetings, conferences, or business events.

Multiple-Entry Business Visa
Designed for frequent business travelers, this visa allows multiple entries within a one-year period, offering flexibility to manage ongoing business operations in Indonesia.

Employment Pass Requirements
The requirements for an Employment Pass in Indonesia may vary depending on the specific job and industry. However, the common requirements include having a valid passport, an employment contract with a sponsoring company, relevant educational qualifications, and work experience. Additionally, the company must provide a sponsorship letter, and a medical check-up is often required to confirm the applicant’s health status before the work visa is granted.

The requirements for registering a company in Indonesia are simple and straightforward. They are:

Appoint a Director

Every company in Indonesia requires at least one director to handle day-to-day operations and make crucial business decisions. The director must meet all legal qualifications.

Minimum of Two Shareholders

To register a company, you need at least two shareholders. Shareholders can be individuals or legal entities, and they hold ownership stakes in the company. For foreign-owned companies (PT PMA), additional requirements for shareholder nationality or residency may apply.

Commissioner Role

A commissioner ensures compliance with Indonesian laws and provides oversight to the company’s operations. The commissioner supervises the director and provides strategic guidance to shareholders.

Investment Value for PT PMA Companies

Foreign-owned companies (PT PMA) must meet a minimum investment requirement based on the business type and company size. This is crucial for proceeding with registration and ensuring compliance with local regulations.

Registered Office Address

A legal business address is required for official communications. This can be a physical office or a virtual address, depending on your company’s needs and local policies.

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Menara Palma #05-02B, Jln HR Rasuna Said Blok X2 No.KAV 6, Kuningan, Jakarta Selatan 12950, Indonesia

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