Common Problems Faced by Foreigner When Incorporating a Business in Indonesia
Opening a company’s bank account as an expat
Technically, it is possible for a foreign corporate entity or foreign investors to open a company’s bank account in Indonesia. Opening a company’s bank account in Indonesia should not be difficult, but different bank might impose different rules and requirements for the application.
When you are ready to start a business in Indonesia, it is definitely worth engaging with Paul Hype Page & Co where you can open a company’s bank account with the assistance from our experienced Corporate Specialist in Indonesia.
Local Company, PT
A Local Company, PT in Indonesia have much more benefits in Indonesia in comparison to Foreign Owned Company. However, to set up a Local Company, PT in Indonesia, the ownership of the company must be 100% local citizens. This led to a major inconvenience towards foreign investors as they would not be able to exercise their ultimate control over the company and how it is managed. This is not preferable by many foreign investors as the local nominee could claim the ownership rights of their share entirely and leave the foreign investor without giving him the opportunity to pursue legal action against the local nominee.
Nevertheless, there is a way in which foreign investors can still gain control of a Local Company, PT. They can do so by opening the company’s bank account overseas such as in Singapore or Malaysia. Here at Paul Hype Page, we have offices located in Singapore and Malaysia. Therefore, we can provide foreign investors with further assistance in setting up a Local Company, PT in Indonesia and to assist them in opening a bank account overseas.
Foreign Owned Company, PT PMA
Foreign investors may think that they would be able to invest in companies they are interested in or are in huge demand in Indonesia. However, the Indonesian Government only allows foreign investors to invest in certain business sectors in accordance to the Indonesian’s Negative Investment List. The Negative Investment List states out the percentages of the ownership that are allowed for foreign investors in a business sectors or industries in Indonesia.
Besides that, to open a PT PMA company, foreign investors would be required to deposit a minimum of IDR 2.5 billion (USD 180,000.00) as the paid-up capital of the company regardless of the company size. This would cause major inconvenience for small foreign investors as USD 180,000.00 is a big sum of money just to set up a small company.
In addition to the paid-up capital, foreign investors are also required to present an investment plan of IDR 10 billion (USD 750,000.00) in about 1-5 years, depending on their business sectors. Similarly, this would be a major problem for most foreign investors.
Paul Hype Page has came prepared with a solution to these major difficulties that will be faced by foreign investors in setting up a PT PMA. In relation to the minimum paid-up capital of USD 180,000.00, Paul Hype Page would be able to offer a loan to suitable foreign investors to cover the full paid-up capital deposit.
On the other hand, in regards to the huge amount of investment plan, Paul Hype Page would be able to assist foreign investors to meet the investment plan requirement of USD 750,000.00 by setting up a company in Singapore or Malaysia.
Contact us or *click here to find out more on solutions in which Paul Hype Page can assist foreign investors on these major problems faced by them.
Types of Business Entities in Indonesia
Perseroan Terbatas (PT)
Perseroan Terbatas (PT) or also known as Limited Liability Company is a legal entity to run a business that consists of capital shares, which is a part owner of shares owned. A majority of the companies in Indonesia are Local PT. It is a limited liability company that is fully owned by the Citizens of Indonesia as only Indonesian individuals or legal entities can be shareholders of a Local PT company. In a local PT company, it is also required to have at least 1 director, 1 commissioner and a minimum of 2 shareholders.
- Can carry out many business activities in various business fields
- Lower minimum paid-up capital than foreign owned company
- Legal Protection Pursuant to the Laws and Regulations
- Clear Separation between Personal Asset and Company Asset
Foreign Owned Company (PT PMA)
In Indonesia this is known as PT PMA (Perseroan Terbatas Penanaman Modal Asing). This is a legal entity which foreigner can use to conduct commercial activities in Indonesia established under the Indonesia law. In a PT PMA, foreigner both individual and legal entities can be registered as shareholder. However, the shares of PT PMA can be owned up to 100% by foreign investors subject to the Negative Investment List.
Based on Indonesia company law, every PMA should have at least 1 director, 1 commissioner and 2 shareholders. The shareholders can be either an individual (foreigner or local) or a legal entity, but at least one of the shareholders needs to be a foreign individual (or foreign legal entity).
- Shares of PMA can be owned up to 100% by the foreign investors, but subject to the Negative Investment List
- On-site tax or import duties are lower
- Has same rights and responsibilities as local companies
A representative office is an office set up by a company located outside of Indonesia (parent company) to take care of its business in Indonesia. It frequently occurs that a foreign investor opens a representative office in Indonesia first in order to ‘get to know the market’ before opening a PT PMA business if the findings turns out to be positive.
- No capital requirement
- Allowed to hire employees
- Entitled to a limited stay permit (KITAS)
Documents Required for an Indonesia Company Registration
General documents requirements:
- Rental agreement between the company and building management
- Original building domicile/statement from the building management
- Building and land tax receipt including the payment approval of current year
- Certificate of ownership if the building is owned
- Statement for lease and use space office (if any)
- Office photos (minimum 3 photos : reception, signage of the company & office room with activity in it)
- Statement of domicile issued by the company and must be acknowledged by the building management
- Company letterhead and copy/sample design for company stamp
Personal documents requirements:
- Foreigner: color copy passport with validity minimum 18 months and 4 blank pages
- Local: Indonesia ID card & Taxpayer Identity Number
- Family card
- Resident domicile letter
- Recent photo with red background (edited photo is unacceptable)
Shareholder documents requirements (for foreign legal entity):
- Copy of Deed of Establishment and its amendment (should be in English or Bahasa)
- Business registration certificate
- Board of Directors structure
Shareholder documents requirements (for local legal entity)
- Copy of all company’s documents (Deed of Establishment, tax identity number, domicile letter, business license or business registration certificate)>
- Copy of ID card and taxpayer ID number for each local BoD and copy passports if any foreigner in it
Shareholder document requirement (for foreigner):
Copy passport with validity minimum 18 months and 4 blank pages
We Will Be There For Your Challenges After Incorporation
Challenges that might occur to you as a business owner in Indonesia includes:
To keep up with the regulations in Indonesia is a common pitfall for many new foreign businesses.
Obtaining Work Passes
Foreigners who wish to reside and work in Indonesia need a valid working permit to do so. The labour legislation imposed by the Ministry of Manpower and Transmigration (MOMT) have set out the requirements to obtain a working permit.
The Indonesian government also imposed strict employment limits on foreign workers can make it difficult to bring manpower in from other countries. Presidential Regulation No. 20/2018 on the Use of Foreign Workers in Indonesia sets out the key points on ways in which you could employ foreign workers.
Being a country of multi-ethnic society, it is vital that a newbie appreciate and understand all the many different customs and traditions that could impact the Indonesian business culture and etiquette.
In Paul Hype Page & Co, we will help you to,
- Get timely updates on the status of your documents and proposed suggestions
- Simple, virtual services that meet industry standards
- Electronic accessibility through our website
- Find the best prices, required licenses, check on common practice and report any advantages
- Help you make structured decisions about your company
- Help you benefit from our years of business activities and compliance experience