Here we will give you an illustrations of some common mistakes that many foreigners made during their company registration process in Indonesia.

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Business in Indonesia

Indonesia might be one of the best countries to start a business but it’s not necessarily the easiest one. Being the largest archipelago in the world, one of the utmost hurdles of doing business in Indonesia, especially for foreigners, is their time consuming process, their language barrier and also the complex regulation of obtaining permits and licenses.

In fact, the process may turn out to be long and expensive. In order to successfully establish a business in Indonesia, it is important to develop a good network and get into the Indonesian entrepreneurship and government circle.

Foreign entrepreneurs and investors should realise the significance of investing in building and nurturing all their connections. Indonesians are very people individuals, and they cherish relationship very much, therefore, in order to get a smooth sailing process, you will need to adhere to these tiny details.

To be able to set up a legal entity in Indonesia, a foreigner should understand The Company Law year 2007 Law No.

As a foreigner, you still need to understand how the entire process is to avoid fraud and mistakes during the registration process, and by engaging with a trusted consultant regarding the setting up of your PT PMA, the requirement of obtaining certain licenses, permits, and visas, the process will be easier. As we have mentioned the language can be a barrier here.

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Plus this is highly recommended, because a foreigner needs an assistant who is familiar with the local law and bureaucracy.

Knowing whether or not an agent is the right one for you can be determined by the following:

  1. It is important to know that the local agent you use is owned by Indonesian. The Foreign Investment Coordinating Board (BKPM) issued a new regulation that only a locally owned agent or at least has a local entity can help the registration process of PT PMA.
  2. Make sure that the consultancy agency is certified by BKPM
  3. Read through their website and find out some previous clients.
  4. Ask the local consultancy agency to provide some Indonesian references
  5. Make sure that during the process, your agent will ask you to sign Power of Attorney. This document is needed especially when you, as the owner of the PT PMA, cannot register yourself and ask the third party (the agent) to do the registration.
  6. BE CAUTIOUS that when they don’t ask for your signature for this document, they will likely to fake your signature, making the whole effort illegal.

The agent will report the progress of the registration process even without being asked to. When communication does not work well, you have to be alert that something has happened. You have the right to always know about everything.

That being said, here are some of the reason why registering an Indonesian company can be tedious.

 

 

  • Not Certain about the Industry and Business Activities

In Indonesia, there are certain fields of industries that are restricted for PT PMA. The list of the restricted industries and industries prohibited for foreign investment can be seen in the negative investment list.

 

  • Uncertainty with the Company Location

It’s important to decide where your company head office will be in the very first place for changing the location of the company head office is both complicated and costly. Some cities in Indonesia, such as Jakarta, allow a PT PMA to have a virtual office.

 

  • Capital is Lower than What is Stated

Based on the Indonesian Law, it is stated that a PT PMA must have at least Rp. 10 billion capital. Regardless the currency rate, the government has set the amount in dollar, which is not less than US$ 1 million.

 

  •  Unreasonable Nominee Arrangement

A nominee arrangement is often chosen by foreigners, who want to establish PT PMAs in Indonesia. We do not say that it is the best option, but we say that this is a solution for a complex registration processes.

 

Some of the reasons of choosing a nominee director will be,

  1. The foreigners do not have sufficient amount of capital as requested by the Indonesian Law to establish a PT PMA (a minimum of US$1 million)
  2. The foreigners do not have some documents needed to register the PMA
  • Underestimating Taxation Issues

Hire a professional accountant to deal with the reporting and make sure that you report and pay the tax regularly. Otherwise, it will call a suspicion from the tax office.

 

  • Underestimating Indonesian Law and Bureaucracy System

Every detail and information related to the registration process must be met, with no exception. Violating them may be considered as an illegal act, and any illegal act will impact on your business in the future.