Guide on How to Open A Foreign-owned Company in Indonesia

Indonesia is an attractive market for foreign-owned companies due to its growing economy, population, and rich natural resources. The country offers numerous opportunities for foreign investment, especially with the increasing government spending on healthcare and infrastructure. However, complex requirements can make registering a foreign-owned company in Indonesia challenging.

Tips for Starting a Business in Indonesia

If you are a foreigner looking to start a business in Indonesia, take note of these essential points:

• What legal entity should you have, or what kind of company formation in Indonesia will you have: a foreign direct investment company or a representative office?
• What line of business will your legal entity be engaged in? Is the sector open to foreign investment? If so, what percentage of ownership is available to foreign participants?
• Ensure you investigate the regulatory framework, minimum capital requirements, organizational structure, tax regulations, Indonesian staff, required activity reports, and more.

How to Start a Foreign Direct Investment in Indonesia

Limited liability company called PT PMA. The Investment Law and Company Law regulate FDI companies and the Positive Investment List.

If your business has foreign shareholders, you must register as a PMA and comply with certain ownership requirements for Indonesian nationals. You’ll need investment approval from the country’s Investment Coordination Board and several other licenses, depending on the nature of your business activity. 

An experienced consultant can help you navigate the required paperwork and research. The SP allows you to establish an Indonesian company, which takes at least two months.

PMA Registration Timeline

Foreign-owned companies in Indonesia must have a minimum capital of US $750,000 or 10 billion Indonesian Rupiah to obtain a permanent business license intended to protect small and medium-sized local Indonesian companies.

The Minimum Capital for PT PMA

To register a company in Indonesia, the minimum investment in paid-up capital is IDR 10 billion. The capital can be deposited in a bank or a notarized letter signed by shareholders can be obtained stating that it will be paid during registration. 

To incorporate a PMA in Indonesia, a minimum of 2 shareholders, 1 director, and 1 commissioner are required. Once registered, the company can apply for a bank account. The foreign PIC must hold a Working Visa.

PMA Company is permitted to recruit foreign employees. However, while submitting the application form to BKPM, there are certain restrictions. The company is required to maintain a ratio of one local employee to three foreign employees.

Easier and Quicker PT PMA Registration

When it comes to PMA registration in Indonesia, a lot has changed. The Indonesian government has made it easier, quicker, and simpler to register and open a PT PMA in Indonesia. The 2021 updates are as follows:

Requirements for Setting up a PMA

To register a PT PMA company in Indonesia, a minimum capital investment of IDR 10 billion (USD 750,000) is required. This amount is also the new paid-up capital amount. However, a domicile letter is not required to register a company in Jakarta. 

It is essential to note that conducting business activities in Indonesia from a residential address is strictly prohibited. If you want to avoid the large cost of building a new office, you can always opt for a virtual or serviced office in Indonesia.

PMA Establishment via OSS

The Online Single Submission (OSS) system has been implemented to ensure a seamless company registration process online. Being done online, company registration is streamlined.

In short, the process of registering a PMA is as follows:

1. Approval of company name: it should consist of three words that are not vulgar or obscene.
2. Deed of Incorporation: it should include an Article of Association, and a notary must be present.
3. Approval of legal entity: After the notary submits the Deed of Incorporation, the Ministry of Law and Human Rights will approve it.
4. Registration of Tax ID (NPWP): A valid NPWP is required to secure other companies’ licenses, conduct banking activities, and fulfill tax obligations.
5. Domicile Letter: Required to show the location of your business.
6. Application of NIB: A unique company profile number that guarantees an immediate operation, provided that no additional licenses are needed. Alongside NIB, Business License(s) and Location Permit will also be granted one day following the registration via OSS. NIB also serves as an import license and customs identification number to be used for the customs clearance process.
7. Application of other licenses: Depending on the business sector, additional licenses, such as commercial and tourism licenses, may be required before operation.

Representative Office as a PT PMA Alternative

This can be useful in the early stages of business but may not be flexible enough for some ventures. This gives a company a legal presence in Indonesia but does not allow a firm to conduct business transactions or take payments for sales.

If a company only wants to sell products in Indonesia, a local partner can help find the proper agents and distributors and pursue product licensing in Indonesia. This business entity is more suitable for marketing and market research purposes before opening a complete legal entity like PT PMA in Indonesia.

Open a PT PMA in Indonesia with InCorp’s Assistance

As a foreign investor unfamiliar with the local regulations in Indonesia, it is always advisable to consult with an expert regarding how to open a PT PMA in Indonesia. Your PMA incorporation in Indonesia will be hassle-free with a step-by-step guide provided by an incorporation specialist.

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