Indonesia’s increasing economic strength and improving environment for the conducting of business activities have caused many foreign business owners to choose to relocate their business there. Thus, the country is now home to a great many relocated foreign businesses.
In 2016, Indonesia’s President Joko Widodo announced the opening up of 35 business sectors which would henceforth allow complete foreign ownership. The announcement caused more foreign companies to decide to relocate to Indonesia. Since then, the relocation of foreign companies has been an increasingly common phenomenon in Indonesia. Due to the government’s recent strategy of attractinga entry of foreign businesses with new tax rates, relocating companies to Indonesia has become ever more popular.
Reasons Why Foreign Companies Relocate to Indonesia
There are many reasons why foreign companies relocate to other countries, including Indonesia. These reasons will differ among various business owners. However, there are certain reasons which are more common causes of an owner or employer deciding to relocate a company to Indonesia. These reasons include the following:
If the economy of a country is not thriving, the companies which are conducting business in that country will certainly be negatively affected. A weakened economy naturally leads to reduced profits which are generated by the firm. However, such is certainly not the case in Indonesia, a country with a growing and increasingly vibrant economy. Evidence of Indonesia’s economic might can be seen in the global economic rankings. Indonesia’s economy ranks as the largest in Southeast Asia. It is also the 16th-largest economy in the world. Therefore, the fact that many foreign companies have chosen to relocate to Indonesia should not come as a surprise.
Relocating a business can be a significant source of financial consumption. However, operational costs are relatively low in Indonesia when compared to those of other countries. Labor is also relatively cheap when compared to labor prices of other countries; this also encourages many people to relocate their companies to Indonesia. The relatively low cost of infrastructure in Indonesia also reduces operational costs and makes operations more efficient. This also drives many to relocate their companies to Indonesia.
Large Consumer Population and Labor Force
The population of the country in which a business operates plays a role in its business success. Businesses in countries with low populations are forced to deal with the challenge of a small market. If the majority of the population is not of working age, the company will also suffer because hiring employees becomes more difficult due to the lack of ready labor. Neither of these is a problem in Indonesia, a country with a massive population and enormous labor force. The country can easily provide both a large market and an ample labor force. Therefore, many entrepreneurs have become interested in relocating their company to Indonesia.
Every business owner intends to make profits. However, if there are no viable business opportunities, it is impossible for a business owner to establish a business, let alone make a profit. Thus, entrepreneurs will search for an environment in which there are many business opportunities which will benefit their ventures. Indonesia is a country full of business opportunities; thus, many foreign companies choose to relocate there.
How to Relocate a Foreign Company to Indonesia
Relocating a foreign company does not have to be difficult as long as the company owner follows all of the legal requirements. However, although following legal requirements is not difficult, doing so is often time-consuming.. For instance, some documentations in Indonesia may take up to six months to be fully processed. Furthermore, relocating a foreign company to Indonesia may only be done by one who owns a work permit and visa as well as any necessary business registration documents and licenses.
Should you be in need of a work permit or visa which is valid in Indonesia, we at Paul Hype Page & Co can assist you. We will handle all the details of your work permit application for you. With our help, your work permit will be received much sooner than usual and in a completely legal and legitimate manner.
Although possession of a work permit and visa are a requirement for the relocation, it is not necessary for the company owner to live in Indonesia just because the owner has chosen to relocate the company to Indonesia. This is because the owner of the company is permitted to hire a person who will be tasked with managing the company as well as visiting the country and the organization whenever such may be deemed necessary.
The entire process can be somewhat confusing for some, especially for those who are new to Indonesia and not particularly familiar with the language or the environment. However, this issue can easily be overcome. This is because there are many relocation businesses with Indonesia which are tasked with the role of assisting foreign business owners in relocating their business to the country. They also assist these owners with the obtaining of the documentation for running a foreign business in Indonesia as well as the general registration of those firms.
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Things to Be Done After Relocation of a Foreign Company to Indonesia
Registration and Licensing
After a company has been relocated to Indonesia, it must then become functional. This can be done by registering the company. No company, whether foreign or local, is allowed to function in Indonesia without being registered.
If you need assistance with the registration of your Indonesia-based company, we at Paul Hype Page & Co are always willing to be of service. Our incorporation specialists will ensure that the process of company incorporation is completed as smoothly and quickly as possible. We will even contact any relevant government authorities on your behalf if you need us to do so.
Understanding of Laws
Various legal regulations are related to the running of relocated foreign companies. For a company owner to ensure that the company is not in violation of any laws and is not having any illegal acts being committed against it, understanding of the laws of Indonesia is necessary. The primary laws to be understood by foreign business owners include company laws, investment laws, and capital market laws of Indonesia.
Place of Residence
Those who plan to move to Indonesia in order to run the relocated foreign company will require a place in which they can live. However, the process of settling in Indonesia becomes much simpler if one utilizes the help of any of Indonesia’s many real estate agencies.
Laws Governing Foreign Companies Which Have Relocated to Indonesia
Owners of relocated foreign companies in Indonesia must be aware of the laws governing the company. Some of the most important laws that govern relocated companies in Indonesia include the following:
Indonesia Company Law
This is a law that protects the foreign limited liability companies that have relocated to Indonesia. Foreign limited liability companies have a set of roles, duties, rights, and obligations to be followed when conducting business operations in Indonesia. This law also protects foreign companies against any unjust obligations that unscrupulous and dishonest people might attempt to impose upon them.
If foreign companies are not careful, they may end up becoming overtaxed. For relocated foreign companies to ensure that they are not subjected to overtaxation while paying their income tax and corporate tax, investment laws may be cited. Nevertheless, business owners should understand the taxation rates and system to understand when and how to use the investment law for the benefit of their business.
Capital Market Law
Illegal activities in business are common all over the world; such is also the case in Indonesia. Therefore, capital market laws are enforced to protect foreigners against such activities in Indonesia. Capital market laws are laws that protect the foreign companies which have relocated to Indonesia from such illegal practices. The Indonesian government has been attempting to ensure that the country’s market is not only free for locals but foreigners as well because they also contribute to the economy of the country. The capital market laws of Indonesia also include certain elements of both the investment laws and company laws alike.
Relocating a foreign company may cost a business owner much of capital and time. However, once the process has been completed in the proper manner, everything will take place in an orderly manner. For this reason, owners of relocated foreign businesses in Indonesia ought to exercise caution and ensure that their relocated businesses are working within the legal framework of Indonesia’s business laws.
Relocating a Foreign Company to Indonesia FAQs
Can a company which has relocated to Indonesia relocate back to its country of origin?Tiwi2020-04-02T14:14:16+08:00
Onecan easily relocate a foreign company to Indonesia. Thus, it is also easy to move the foreign company back to its country of origin. However, the business owner will have to follow the processes required to terminate the business activities of the firm in Indonesia.
Can any company owner, whether local or foreign, relocate their company to Indonesia?Tiwi2020-04-02T14:13:12+08:00
The Indonesian government welcomes all business from abroad in their efforts to relocate to Indonesia. This is true regardless of whether the foreign-based business is owned by a foreigner or an Indonesian citizen who is living abroad. It is therefore possible that anyone can relocate their companies to Indonesia regardless of whether they are foreigners or locals.
Where do most foreign business owners in Indonesia come from?Tiwi2020-04-02T14:11:52+08:00
Indonesia is a country in which many expatriates live. Of these expatriates, many are business owners. Among these foreign business owners in Indonesia, the overwhelming majority of them are from China.