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Register a Company in Indonesia

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. 

 

Things you should know about PMA: 

  • Directors, Commissioners and Shareholders 

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).  

The director and commissioner can also be a shareholder. Commissioners are not part of the daily company management. But when it comes to owning company shares, they can although they are not required to have any. Note that PMA in Indonesia must have at least one commissioner.  

While choosing to have more than one commissioner, one of them must become president commissioner. This gives him or her the responsibility to be in charge of the board of commissioners. The ones that make your company’s executive management are the board of directors. They are the ones that are supervised by the board of commissioners. 

As for the director, they are in charge of company management in accordance to any policy that is appropriate by the Indonesian Company Law or AoA (Article of Association). Apart from having the right to legally represent the company, the directors are authorized to sign any contracts between the company and third parties such as vendors, suppliers and clients as well as the taxation documents. However, a non-resident director cannot sign documents on behalf of the company. Therefore, the director has to first process the work and stay permit immediately after he is appointed as a director. 

 

  • Shares

Shares of PMA can be owned up to 100% by the foreign investors, but according to the Negative Investment List, ownership of the PMA shares is classified based on the business field and it is varies from 0% to 100%. 

 

  • Paid-up Capital 

The minimum investment in Indonesia to start a PMA is IDR 10 billion or equivalent to current exchange rate. This applies to all business sectors and the amount of minimum investment is not including the value of the land and buildings owned by the company.  

Minimum paid-up capital is 25% from IDR 10 billion.  

 

  • Registered office address

The registered office address must be in situated in a business or commercial area. In accordance to the Indonesian regulation, apartment or residential area can’t be used as an office address. The areas of business where a person can start a PT PMA is subject to the Negative Investment List. 

 

  • Licenses

Specific license might be necessary for each specific sector. Some business activities require specific licenses before the company run its business while others may start their business immediately after incorporation. 

 

  • Deed of Establishment

The shareholders must present a deed of establishment which needs to be legalized by a public notary. The deed of establishment contains, beside the AoA, the following additional information: 

  1. Regarding the Founders; 
  2. Regarding Board of Directors and Board of Commissioners; 
  3. Regarding the Shareholders (other than the founders). 

 

Local Company

This company is known as Local PT (Perseroan Terbatas). 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.  

However, foreigners who wish to acquire a Local PT can do so by purchasing over the Indonesian shareholder’s shares, be it part or all of the shares in the Local PT.  

This would mean that the legal entity of the company would have to be converted into a Foreign-owned Company (PT PMA) instead of Local PT. According to the business activities, there are several business fields which are closed for foreign ownership (check the updated negative investment list to see what the forbidden business fields are for foreigners).  

Local company is a great choice for foreign investors who wish to expand their business in Indonesia but is constrained by limited ownership for certain business areas.  

 

Things you should know about local company: 

Directors, Commissioners and Shareholders 

In a local PT company, it is also required to have at least 1 director, 1 commissioner and a minimum of 2 shareholders. The difference with PMA is only Indonesian citizens and/or Indonesian legal entities are allowed to hold shares as registered shareholders. To represent the company in performing all transactions and activities, there must be at least 1 director in local company, whose actions are supervised by at least 1 commissioner. If there are more than 1 director or 1 commissioner, they will comprise to be a Board of Directors or Board of Commissioners, with one of them acting as the President Director or President Commissioner.  

 

Capital 

According to the Regulation of the Minister of Trade on Amendment to Regulation of the Minister of Trade No. 36/M-Dag/Per/9/2007, classified Trade Business License into 3 classifications, as follows: 

  • Small Trade Business License 

Small Trade Business License must be owned by a trading company whose the net worth (paid up capital) is more than IDR 50,000,000, up to IDR 500.000.000, excluding land and building of business premises. 

  • Medium Trade Business License 

Medium Trade Business License must be owned by a trading company whose the net worth (paid up capital) is more than IDR 500.000.000, up to IDR 10.000.000.000, excluding land and building of business place. 

  • Large Trade Business License 

Large Trade Business License shall be owned by a trading company whose net worth (paid up capital) is more than IDR 10,000,000,000 excluding land and building of business premises. 

Note: To hire a foreign employee in local PT company, the required company size is medium with paid-in capital above IDR 1,100,000,000. 

 

Registered Office Address

The registered office address must be in business or commercial area. Apartment or residential area cannot use as an office address. 

 

Licenses

Specific license might be necessary for each specific sector. Some business activities require specific licenses before the company run its business while others may start their business immediately after incorporation. 

 

Differences between Foreign Owned Company (PT PMA) and a Local Company (PT)  

Indonesian 

Companies 

PT PMA 

(Foreign company) 

PT 

(Local Company) 

Allowed activitiesCan manage all business activities within the business field subject to the Negative Investment List.Can carry out many business activities in various business fields.
OwnershipForeign ownership can be anything from 0% to 100% depending on the business fields. The list of business fields that are not in Negative Investment List can be owned 100%.
  • Shareholders must be 100% local citizens.
  • Limited amount of work permits for foreigners, depends on the size of capital
Minimum CapitalMinimum paid-up capital is 2.5 billion IDR (~175,000 USD). For some industries, the required capital is higher.

The minimum investment in Indonesia to start a PMA is IDR 10 billion or equivalent to current exchange rate. This applies to all business sectors and the amount of minimum investment is not including the value of the land and buildings owned by the company.

Minimum paid-up capital is 25% from IDR 10 billion.

  • Micro: Not more than IDR 50 million (~3,400 USD)
  • Small: Between IDR 50 to 500 million (up to ~35,000 USD)
  • Medium: Between IDR 500 million to 10 billion (up to ~700,000 USD)
  • Large: More than 10 billion
Key BenefitsCan operate fully as an independent limited liability company subject to the business fields stated in the Negative Investment List.

 

Can conduct all business activities within the business field it got approval for.
Key Disadvantages
  • High capital requirement
  • Ownership restricted or forbidden in some industries
  • The company is required to provide reports on business activities to the BKPM every 3 months so that the BKPM may monitor the company’s development.

 

No foreign shareholders and foreigners must apply to local shareholders for a reliable nominee agreement.
Visas and Work permits for Foreigners
  • Shareholders, directors, and commissioners are qualified for work permits
  • Unlimited amount of business visa sponsorships
  • Only Medium Size PT can apply work permit for its foreign worker
  • Unlimited amount of business visa sponsorships
Tax Compliance
  • Monthly withholding tax report
  • Quarterly or semi-annual investment reporting
  • Annual tax reporting
  • Monthly withholding tax report
  • Annual tax reporting

 

Documents Required for an Indonesia Company Registration

 

General documents requirements: 

  1. Rental agreement between the company and building management 
  1. Original building domicile/statement from the building management 
  1. Building and land tax receipt including the payment approval of current year 
  2. Certificate of ownership if the building is owned 
  3. Statement for lease and use space office (if any) 
  4. Office photos (minimum 3 photos : reception, signage of the company & office room with activity in it) 
  5. Statement of domicile issued by the company and must be acknowledged by the building management 
  6. Company letterhead and copy/sample design for company stamp 

 

Personal documents requirements: 

  1. Foreigner: color copy passport with validity minimum 18 months and 4 blank pages 
  2. Local: Indonesia ID card & Taxpayer Identity Number 
  3. Family card 
  4. Resident domicile letter 
  5. Recent photo with red background (edited photo is unacceptable) 

 

Shareholder documents requirements (for foreign legal entity): 

  1. Copy of Deed of Establishment and its amendment (should be in English or Bahasa) 
  2. Business registration certificate 
  3. Board of Directors structure 

 

Shareholder documents requirements (for local legal entity): 

  1. Copy of all company’s documents (Deed of Establishment, tax identity number, domicile letter, business license or business registration certificate) 
  2. 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): 

  1. Copy passport with validity minimum 18 months and 4 blank pages 

 

The steps and timeline for company registration process as follows: 

No. Description Estimate Duration 

(working days) 

1 Approval of company name at the Ministry of Law and Human Rights 2 
2 Preparation of Article of Association by Notary (Akta) 3 
3 Obtain Deed of Establishment at the Ministry of Law and Human Rights (SK Kehakiman) 4 
4 Obtain Domicile Letter at the local government office 5 
5 Obtain Tax Identification Number (NPWP) 3 
6 Register Business Indentification Number (NIB = Nomor Induk Berusaha) 3 
7 Register Business License (Izin Usaha) 3 

 

After your company is established, you can start running your business in Indonesia and conduct activities such as: 

  • Open an Indonesia corporate bank account 
  • Rent or buy property and other assets on behalf of your company 
  • Start other preparations for your operation, such as but not limited to hiring staff, preparing office renovations, etc. 
  • Proceed to obtain work and stay permits for foreign employees in your company 

 

Documents Required for Opening Corporate Bank Account: 

  • Completed corporate bank account opening forms 
  • Copy of all company’s documents & bring the original as well to be verified by the bank officer 
  • Copy of ID card for local director or passport for foreign director 

 

Visa 

Foreign investors that are staying in Indonesia for less than 30 days do not require a business visa upon visiting the country. However, they must: 

  • Hold a passport with a validity of at least six months with two blank visa pages 
  • Hold proof of onward and return flights 
  • Hold all documents required for the next destination 
  • Hold proof of sufficient funds relative to your intended length of stay 
  • Confirm with the airline prior to their travel date that boarding will be permitted without a visa 
  • Arrive and depart the country from one of the following ports of entry listed here. 

For foreign investors that are staying longer than 30 days, they will need to obtain the required visa. Acquiring a visa and stays permit would be a challenge in doing a business in Indonesia. There are two types of visa that are commonly used for foreigners who work in the business industries to stay in the country, i.e. the Business Visa and Working Visa.  

Know Your Customer (KYC) Checklist 

Before we incorporate your company, it is necessary for us at Paul Hype Page to know who you are through the Know Your Customer (KYC) process. The KYC refers to due diligence activities that all regulated companies must perform to ascertain relevant information from their clients for doing business with them. 

With our ibizfile system, together with the assistance of Dow Jones, the process of conducting a KYC search is easy, effective, and legitimate.  

Being part of our internal process, once this is conducted, the credibility of you as an individual and a company grows  little more. 

 

Challenges You Might Face Incorporating an Indonesia Business as a Foreigner

As a foreign investor, there are several challenges that might occur along the process of incorporating an Indonesia Company. The following challenges are such as: 

 

Local Company, PT 

If foreign investors were to open a Local Company, PT in Indonesia, the ownership of the Local Company must consist of 100% local shareholders. This would create a major problem for foreign investors as they would have no rights in controlling the management of the company and to make decisions regarding the direction of the business. 

 

Foreign Ownership Limitation  

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. 

Foreign investors are only capable of setting up a business in Indonesia via a foreign investment limited liability company (PT PMA) or through a Representative Office, (also known as Kantor Perwakilan Perusahaan Asing/KPPA). The local Indonesian law regulates and restricts the establishment of foreign businesses in the country for certain specific businesses in The Negative Investment List. For certain business such as Construction and Installation of High Voltage Electricity, The Negative Investment List 2016 opens only 49% of shareholdings for foreigners.  

Besides that, foreign investors would also be required to deposit a minimum of IDR 2.5 Billion USD 180,000.00) as a paid up capital requirement and this would cause a serious problem for many small foreign investors. 

 

How Do you Overcome the Challenges

Local Company, PT 

The only way in which foreign investors could set up a Local Company, PT is to get a local nominee shareholder. 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. 

Here at Paul Hype Page, we have offices set up overseas in neighbouring countries such as in Singapore and Malaysia. Instead of opening a corporate bank account in Indonesia, foreign investors could open a bank account overseas in Singapore to gain control of the company through the operations of the company’s bank overseas. For instance, Paul Hype Page has ties-up with DBS bank in Singapore for application for corporate account opening and regional payment services. Therefore, Paul Hype Page would be able to provide foreign investors with further assistance in incorporation of a Local Company, PT and to open a foreign company bank account. 

 

Foreign Owned Company, PT PMA 

Due to the major inconvenience faced by small foreign investors in Indonesia on the minimum paid-up capital of USD 180,000.00 in Indonesia, Paul Hype Page have came up with a solution to help out foreign investors in regards to this matter. Here at Paul Hype Page, we would be able provide loans to assist foreign investors in covering the full amount of the deposit. 

By setting up another company in Singapore or Malaysia prior to setting up a company in Indonesia would also help foreign investors to effectively present the investment plan of IDR 10 billion (USD 750,000.00) as required by the Indonesia Law.

 

Local Investors against Foreign Investors in Incorporation of a Company in Indonesia 

LOCALS 

VS 

FOREIGNERS 
Indonesians can own land (Limited Land and Company Ownership)Foreigners can own Company Ownership but it will be subjected to the Negative Investment List 
Much cheaper registration fee compare to the foreigners Registration process is much more expensive than Local PT company 
Local citizens can work as any kind of jobs they want to Foreigners will need to obtain a Working Visa. 
Majority of the regulations are in Bahasa which is their Native language. Only certain government websites or regulations are bilingual (Bahasa/English) Foreigners interested in investing by registering a company in Indonesia can only sign business contracts after PT PMA is fully registered 
 

Local citizen will not face difficulties in opening a bank account in Indonesia as there is no need of transferring funds in foreign currencies. 

It is difficult for foreign investors to find an efficient Indonesian business bank account for their company. 

 

Why chose DBS 

DBS Bank has been named the ‘Safest Bank in Asia’ by Global Finance from year 2009 to 2017. DBS was also named the ‘World Best Digital Bank’ in year 2016 and 2018 and the ‘World’s Best SME Bank’ in 2018 by Euromoney. 

DBS Bank could also Access 13 different countries’ currencies. The countries are as follow: 

  1. Australia, Australian Dollar (AUD); 
  2. Switzerland, Swiss Franc (CHF);  
  3. China, Chinese Yuan (CNY);  
  4. European Union, Euro (EUR);  
  5. Great Britain, Pound Sterling (GBP);  
  6. Hong Kong, Hong Kong Dollar (HKD);  
  7. Indonesia, Indonesian Rupiah (IDR);  
  8. Japan, Japanese Yen (JPY);  
  9. New Zealand, New Zealand Dollar (NZD); 
  10. Sweden, Swedish Krona (SEK); 
  11. Singapore, Singapore Dollar (SGD); 
  12. Thailand, Thai Baht (THB); and  
  13. United States, United States Dollar (USD). 

 

How Paul Hype Page & Co. Can Assist You 

In Paul Hype Page and Co, we will adhere to all your administration and business needs in accordance with Indonesia regulations and requirements. Any queries could be assisted by our friendly and experienced Indonesian staffs in Indonesia. 

As Singapore’s NO. 1 company incorporation service provider, our dedicated and experienced Corporate Specialists are here to guide you through the entire Indonesia company incorporation process. 

We have 3 physical offices located in Indonesian, Malaysia and Singapore. We also have a virtual office in Korea. 

That means, coming in with Paul Hype Page & Co, do not only open you to the Indonesian client base, but open a possibility of conquering the Association of Southeast Asian Nations (ASEAN) region. 

With 3 other offices in the Association of Southeast Asian Nations (ASEAN) region, we can guide you to venture your business into that region. 

In ASEAN, it all about personal relationship. Hence, our dedicated and friendly staffs at Paul Hype Page & Co will provide you with personalize and private consultation if you need help with matter such as, 

  • Banking within your jurisdiction 
  • Business liaising with the government department 
  • Business license applications 
  • Emailed documentation of your addresses matters on your residency, financial background from your country of origin 

 

Besides, Paul Hype Page & Co is one of the incorporation companies which have ties-up with DBS Bank for applications of corporate account opening and regional payment services.  

Contact us to get your business started in Indonesia today.

Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.

Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia

Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.

 

How we can help you:

We will call you back, please click below link and make appointment with our Sales consultant :

BOOK NOW

 

Step 1- Listen to your Business plan and Relocation needs.

Step 2- Analysis your Tax Planning

Step 3- Recommend the most suited type of Company Incorporation, Open Bank account and Work Visa

Step 4- Arrange for your Spouse and Children Visa

Step 5- Assist as your company to hire staffs and handle all HR matters

Step 6- Every financial year end, we assist you with your yearly OSS Finanical and Tax Compliance

Step 7- Assist you to expand business to Malaysia, Indonesia, Vietnam and Thailand.

Get in Touch with Us Today.

 

Paul Hype Page

Website: https://www.paulhypepage.co.id