With it being a rapid growing economy in the South East Asia region, many foreign investors are seeking ways to expand their business activities in Indonesia. The Indonesia legislation allows the establishment of limited liability companies, which are preferred by entrepreneurs all over the world, with ease. Therefore, to register a company in Indonesia is much simpler compare to many Asia Pacific countries.
Company Registration and Compliance
Before you register your business in Indonesia, you must first understand that there are 2 (two) main types of companies: Foreign Owned Company (Limited Liability Company) and Local Company.
Foreign Owned Company (Limited Liability Company)
In Indonesia this is known as PMA (Penanaman Modal Asing) or 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. Based on investment law No. 25/2007 regarding investment in Indonesia, a foreign investment is defined as an investing for the purpose of running business within Indonesia.
In a PMA, foreigner both individual and legal entities can be registered as shareholder. Shares of PT PMA can be owned up to 100% by foreign investors subject to the Negative Investment List.
Foreigner’s ownership of PMA shares are classified based on the company’s business activities, and varies from 0% to 100%. However, some business activities may require Indonesian citizen or local legal entities to hold shares alongside the foreign investors.
To find out which sector are open to foreign investment you need to check on the Negative Investment List, a list compiled and regularly update by the Indonesia Investment Coordinating Board (BKPM). In case a sector is partially closed to foreign investment, then the list states the maximum allowed percentage of foreign ownership. This means that you will need to have an Indonesia citizen partner in order to engage in business that particular sector.