Indonesia has become one of the top destinations to invest in as a foreign entrepreneur because it is the world’s largest archipelago, and its economy is constantly growing.
However, injecting a large number of money and jumping into a place you are unfamiliar with is not advisable, especially when you are starting a commercial venture in a new market. It is important to understand the company incorporation process and business structures in Indonesia so you can make a sound decision.
One of the types of business entity you can setup is an offshore company incorporation in Indonesia. Offshore companies offer different types of benefits, including low tax obligations, low setup and maintenance costs, and reduced administration.
What is an Offshore Company in Indonesia?
Offshore companies carry out the same type of business as a locally incorporated company. The liability of its shareholders is generally limited to the amount of capital they have invested into the company, and they both will essentially be a private limited company. However, this will be known as an international business.
The difference is that an Indonesian offshore company identify themselves with the company’s incorporation by jurisdiction and that a locally incorporated company will go through the usual process of an Indonesia company registration while an offshore company will be incorporated by a local nominee director.
For foreign companies who is setting up an offshore company in Indonesia, and do not wish to relocate, can also opt for the offshore company incorporation option.
You can incorporate an offshore company in Indonesia without any work passes or work visa (KITAS). However, you will not be able to reside in Indonesia for extended period of time beyond your travel visit pass duration.
Benefits of Offshore Company Incorporation in Indonesia
There are plenty of benefits of incorporating an offshore company in Indonesia. These include:
Aside from the above, the cost efficiency of incorporating in Indonesia is another attractive factor for investors and entrepreneurs given the low cost of labour in the country. Most investors also often associate an offshore company with tax efficiency.
Incorporation with Nominee Director
The first way to incorporate an offshore company is through a nominee director.
If you are new to the business world, a nominee director is an individual who is appointed to represent the interests of another group or person or company.
As the name suggests, a nominee director helps foreign individual or investors for an Indonesia Company Incorporation, and they function as the director of a company for meeting the legal requirement to own a local director. Due to the functions, a nominee director acts passively and lacks certain power in the company.
Indonesia Offshore Company Registration Requirements
If you do decide to incorporate an offshore company in Indonesia, you should know certain things prior to the incorporation.
Indonesia has two business entities open to foreigners:
A PT PMA company or also known as Perseroan Terbatas Penanaman Modal Asing in Bahasa Indonesia is a deal for companies that wants to engage in commercial activities in Indonesia. While foreign investors who seek to engage in market research, networking, or feasibility studies, opting for a representative office (KPPA) is the ideal business route.
However, do note that foreign investors would also be required to comply with the Positive Investment List laid down by the Indonesian government.
A KPPA company or also commonly known as Kantor Perwakilan Perusahaan Asing (KPPA) in Bahasa Indonesia allows foreign investors to create a market presence in Indonesia and similar to PT PMA, a KPPA is usually set up for management reasons. However, its roles are limited to managing, coordinating, supervising, liaising, and representing the main company.
As a KPPA Company, it is important to note that you are not allowed to receive any revenue.
Opening a Company Bank Account in Indonesia
After deciding on your type of business entity and completed the company registration process, the next step is to open your corporate bank account in Indonesia.
The requirements to open a company bank account are:
A common reason to set up an offshore company is to meet the legal requirements of the country where you want to buy property.
Some of the benefits of having an offshore company includes:
- Asset protection
- Reduced tax liability
- Protection against lawsuits
- Flexible business laws
- Ease of operation
In Indonesia, a foreign-owned company receives many privileges and advantages, and they are mentioned in the following.
- Ease of obtaining licenses and permits – Most checks are done within a short amount of time with reference other business entity types.
- Sponsorship of Foreign Employees – Foreign employees can receive sponsorships from company if they meet the criteria set by the government.
- Lower Import Duties – The amount of import duties is lessened while compared to other business entities, allowing the business owner to benefit from tax and other financial advantages if they are eligible.
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.