Starting a business in Indonesia has lots of advantages from its large population to its growing economy. For those who are planning to incorporate a company in Indonesia, you may have the perception that a local PT (Perseroan Terbatas) company can only be set up by locals.
While that is true to a certain extent, a foreigner can also set up a local PT company through a local nominee director arrangement. This article will provide insights on how to set up a local PT company in Indonesia as a foreigner.
What is a Local PT Company
There are 3 main types of business entities in Indonesia – local PT company, foreign-owned PT PMA company, and a representative office (KPPA).
A local PT company is a limited liability company established according to the laws of Indonesia. For a local PT company, only Indonesian citizens and Indonesian legal entities are allowed to hold shares as registered shareholders.
Foreigners are not allowed to be shareholders for a local PT company in Indonesia.
Benefits of Local PT Company in Indonesia
Local PT companies are one of the most common and well-known company types in Indonesia because of the benefits tied to them. Some of these advantages include:
1. Lower paid-up capital requirement
Compared to a PT PMA company, a PT company requires a much lower paid-up capital. Depending on the scale of your business, the minimum investment value ranges from IDR 50 million to IDR 10 billion. For PT PMA companies, it stands at IDR 10 billion.
|Size of Business Entity||Minimum Investment Value|
|Small-scale business||IDR 50 million|
|Medium-scale business||IDR 500 million|
|Large-scale business||IDR 10 billion|
In contrast, PT PMA companies (foreign-owned companies) would need an investment value of a minimum IDR 10 billion.
2. Holding multiple business licenses without needing to commit additional paid-up capital
As a local nominee structure, the company can have three main business activities without forking out additional paid-up capital for the other businesses. The only cost incurred for the maintenance of the local PT company, such as recuring annual fees.
3. Ability for funding
With a local PT company in Indonesia, you can easily secure additional fundings and capital through various means such as by issuing new shares.
4. Wider range of business opportunities
In Indonesia, there are certain business activities that are restricted under the new positive investment list, which replaces the negative investment list. Local PT companies do not have such restrictions and have a wider range of business activities to choose from, as compared to a PT PMA company.
Requirements to Set Up a Local PT Company in Indonesia
Before registering a local PT company, do make sure that you are able to fulfil these requirements below, else your company registration will not be successful.
How to Incorporate a Local PT Company as a Foreigner
To reap the benefits of a local PT company as a foreigner, a local nominee arrangement is required. This means that the company will be set up by a local nominee director, and the local nominee director will have full legal ownership of the company.
The way you as a foreigner can gain control of a local PT company in Indonesia is by setting up the company’s bank account in Indonesia. While you will not have the legal ownership of the company, you can still take control of the company’s funds from managing the bank account and transactions.
For those who are not comfortable with letting another individual or entity to have full legal ownership of your company, you can consider setting up a PT PMA company instead.
Documents Required for Incorporation of a Local PT Company
There are certain documents that you will need to provide and prepare for your company registration in Indonesia. These documents are listed below.
Personal Documents – Directors & Commissioners
A representative office is a type of business entity that foreign companies set up to conduct research as they have interest in exploring potential business opportunities before making a decision to set up a permanent office. It does not have a legal status, and cannot engage in trading or any business activities that generate income. However, it can conduct marketing and promotional activities.
The Negative Investment List was replaced by the Positive Investment List in 2021. The list details the restricted sectors that the government prohibits investors and entrepreneurs to invest in.
Articles of association form a document that specifies the regulations for a company’s operations and defines the company’s purpose. The document lays out how tasks are to be accomplished within the organisation, including the process for appointing directors and the handling of financial records.
A nominee director is a person appointed to represent the interests of another group or person. For instance, a nominee director may be appointed to sit in a board by a substantial shareholder or a special class of shareholders.