Embarking on the journey of establishing a business in Indonesia necessitates a firm grasp of the company registration process. Aspiring entrepreneurs and seasoned investors alike are met with a maze of legal intricacies and procedural hurdles. From selecting the appropriate legal structure to navigating regulatory requirements, every step demands careful consideration. Amidst this complexity, understanding the nuances of company registration is crucial for laying a solid foundation for future growth and success. In this article, we delve deep into the Indonesian company registration process, shedding light on key procedures and insights to empower businesses in their pursuit of market entry and expansion.
In terms of business development, the Indonesian market offers competitive value and opportunity. Indonesia is among the most promising countries for business due to its enormous labor force, strategic position, and plenty of natural resources. Additionally, the government has implemented various reforms to attract foreign investors and simplify the process of starting businesses in the country.
However, there are a lot of intricate factors to take into account for foreigners wishing to conduct business in Indonesia. As an illustration:
Determine whether your company is a representative office or has direct foreign investors, specifying the type of legal body it represents.Identify the industry in which your company’s legal entity will operate.Assess whether foreign investment is permitted in this sector, and if so, determine the ownership percentage permitted.
Continue reading below to learn more about the Indonesian International Company Registration Process.
How to Start a Foreign Company in Indonesia
You ought to be aware of and comprehend the minimal capital requirements, regulatory framework, organizational structure, mandatory activity reports, tax laws, labor force usage in Indonesia, and so on. Here’s how to establish a foreign business in Indonesia:
1. As a representative office, the Foreign Enterprise Agency
In fact, this kind of firm is better suited for establishment in its early stages. Among its benefits are:
Reasonably quick and simple to operate.Neither a large investment nor a capital deposit are necessary.simple structure to create. Only appoint a Chief Representative Office to run the representative office in Indonesia
Nevertheless, this method may not be flexible enough for some kinds of businesses. The reason is that your company will have a legal umbrella in Indonesia, but it is not allowed to take profits from sales or engage in business transactions. So, the representative office was better set up for market research and marketing purposes before establishing a full legal body.
2. Foreign business organization PT. PMA
The Act governs the process of forming a foreign firm in Indonesia through Foreign Investment (PMA). The PMA is essentially a limited corporation (PT).
Meanwhile, funds or investments from foreign entities are referred to as foreign direct investment, or FDI. FDI is governed in Indonesia by:
Investment Law No. 25/2007.Law No. 40/2007 Concerning Limited Liability Company (as partially amended by Government Regulation In Lieu of Law No 2/2022).Perpres No. 10/2021 as amended by Perpres No. 49/2021 concerning Investment Business Fields. Positive Investment List Disclosure.
Any company with shares owned by foreigners is required to register as a PMA. In the meantime, positive investment lists all company sectors that are available to full-owned ownership as well as those that are restricted to specific restrictions for foreign investment.
Depending on your business activities, a further business license from the government may be a requirement for each PT PMA that registers in Indonesia. You still need to take care of several licenses with the local government after that.
You should think about hiring a local consultant to help you with the licensing and legal matters. They would be of great assistance.
The method by which PT. PMA is created
There are a few steps you must take when setting up a PMA, such as:
Get approval from Kemenkumham, the Ministry of Human Rights and Law, for the name of your business.Deed of Establishment by Public NotaryAcquire the company’s formation certificateAcquiring a mandatory tax identification.Acquire the corporate registration numberBusiness license (as necessary depending on the business activities)
Terms of PT. PMA’s establishment
Establishing a PT PMA in Indonesia can be a remarkable and enduring process. On the other hand, the procedure might be simpler and quicker if all the conditions were satisfied. What prerequisites must be met in order for PT PMA to be established in Indonesia?
1. Minimum Capital Requirement for Foreign-Owned Company
In Indonesia, the minimum capital requirement for a foreign-owned company is IDR 10 billion or equivalent to approximately USD680,000. For the purpose of establishing a PT PMA, a statement letter/commitment letter is required to be signed by the shareholders as the bank account of the PT PMA is not yet be able to set up.
2. Shareholder Requirements
In compliance with the law, the company must issue shares if the PMA operates in the form of a PT enterprise. This necessitates a minimum of two shareholders, each of whom can also act as a director and commissioner.
3. Location Consideration
Foreign investor owners have the freedom to establish their businesses in any part of Indonesia. However, it is important to note that the government emphasizes the establishment and launch of industries within designated commercial business area (not housing complex or apartment).
Summary
In conclusion, establishing a business in Indonesia entails a comprehensive understanding of the company registration process. From selecting the appropriate legal structure to navigating regulatory requirements, entrepreneurs encounter various challenges. Two primary methods for foreign companies include setting up a representative office or forming a Foreign Business Entity (PT. PMA). While the former offers simplicity and ease of operation, it restricts profit-making activities. Conversely, PT. PMA requires adherence to specific laws and regulations, including minimum capital requirements, shareholder criteria, and location considerations. Throughout the process, collaboration with local consultants can streamline licensing and legal matters. Ultimately, achieving success in Indonesia’s dynamic market requires meticulous planning, compliance with regulations, and strategic decision-making.
Let us ease the process of registering an international company in Indonesia! Register your business here with CPT Corporate!
This press release has also been published on VRITIMES
