Becoming your own boss or expanding your business in Indonesia is a dream for many people; but having a great idea or a fantastic product doesn’t mean anything until you can successfully establish a company within the country.
This may seem like a relatively easy task in comparison to branding, website building, developing your own unique product etc; however, setting up a business in Indonesia can be extremely tricky and time consuming.
In this article Mega Rizkiani, LetsMoveIndonesia’s in house Company Establishment Specialist answers some of your most commonly asked questions about setting up a company in Indonesia.
What are the different company establishment options?
MR: There are a few possible ways to do this depending on your nationality and business model. If you are a foreigner, the best option is to set up a PT PMA. A PMA allows the foreigner to possess 100% ownership of the business.
If you are Indonesian or have Indonesian partners, you may obtain a Local PT whereby the ownership will be 100% Indonesian owned.
Please note that with some industries, foreign ownership is not allowed, so you may have to establish a Local PT.
In addition you many find information regarding which business sectors can be owned by foreign investors in the Negative Investment List (latest revision done through the Presidential Regulation No. 44/2016). If the sector requires partial domestic ownership, then you will need a local partner. Business fields which are not included in the Negative Investment List are 100% open for foreign investment, unless regulated differently in other regulations.
If you are unsure whether your business field falls under PMA guidelines, please feel free to contact me for advice.
What does the PT stand for and are there any limitations to my business name?
MR: PT is basically the Indonesian equivalent to Limited, Pte or Ltd.
In Indonesia you must register your company name in Indonesian using a minimum of 3 words. For example: Klub Rumah Baru. But, don’t worry this is just your company establishment name, you may brand your business with an English name if you prefer.
When setting up a business do you need an actual office or can you use a residential location?
MR: Before processing of incorporation, you need to choose the location of your business and have a registered address in an office building Indonesia. You cannot use your home address as it is not possible to register a company with a residential address. Alternatively, you can also use a virtual office for Local PT or Coworking Space for PT PMA.
What is paid up capital and how does that effect the business set up?
MR: Paid up capital is the amount of money the shareholder invests into the business. The amount varies depending on whether the business is a PT or a PMA and the proposed size of the business.
There are 2 ways to prove the paid up capital; one being to send a copy of your company bank statement which shows the investment amount, the second option is to sign a statement letter acknowledging that you will invest the capital in the future.
The paid up capital amounts are as follows:
Small: Above IDR 50.000.000 – 500.000.000
Medium: Above IDR 500.000.000 – 10.000.000.000
Large: Above IDR 10.000.000.000
Please note, that if you want to employ foreigners, in a PT, the company size must be at least Medium with a paid in capital above IDR 1.100.000.000.
Being a foreign owned company the investment value is significantly higher than that of a PT. The investor should invest above USD 1 million / 10 Billion IDR as their investment plan, with a paid-up capital above USD 250.000.000 / 2.5 Billion IDR. The Investment plan can either be cash or fixed assets, such as machinery.
According to the Indonesia Company Law (04/2007), every limited liability company in Indonesia requires at least two shareholders, one commissioner, and at least one director. The shareholders can be individuals, corporations, or both.
Do you need to provide proof of transfer of your paid up capital?
MR: Whilst processing our company establishment, you do not need to provide proof of transfer for your paid up capital. You may pay the paid up capital once the company is established.
Are there any standard compliances you need to know before establishing your company in Indonesia?
MR: Apart from taxes, companies must also register for social and health security programme (BPJS) by the government. For PT PMA companies it is mandatory to report investment four times per year which is commonly known as the “LKPM Report”.
How does the taxation process work in Indonesia?
MR: All companies in Indonesia must pay and report taxes on a monthly and annual basis. The main corporate taxes imposed on companies in Indonesia are: corporate income tax (CIT), value-added tax (VAT), and land and building tax. The general corporate income tax rate imposed in Indonesia is 25%. Medium-sized companies with annual revenue of less than IDR 50 billion can apply for a reduced income tax rate of 12.5%, and small companies with annual revenue of less than IDR 4.8 billion are eligible for corporate income tax of 0.5%.
Can the Director or Commissioner be a foreigner in a PT or a PMA?
MR: Directors and Commissioners of a PT PMA can be foreigners or Indonesians and they are not required to be residents in Indonesia. Please note that non resident Directors will not have the authority to sign documents on behalf of the company.
In regard to a Local PT you may have a foreign Director, but you should still have a minimum of 1 local Director as well as a local commissioner.
How many foreigners can you hire once the company has been established?
MR: A PT PMA may hire as many foreigners as required, as long as you have a minimum of 10 Indonesian Employees per 1 foreigner.
For a Local PT you can hire 1 foreigner as long as you have a minimum paid up capital of 1.1 billion IDR.
What are the responsibilities of the Director and the Commissioner?
MR: The Directors responsibilities are to manage the company pursuant to its Articles of Association and the Indonesian Company Law.
The Commissioners responsibilities will be to supervise the company’s activities.
Once the company is established, do you need to renew any licenses every year?
MR: There are no validity restrictions or renewals that are mandatory every year, as long as the company is still running and there are no amendments required from either the business structure or new governmental regulations.
If we would like to change the office address later is this possible?
MR: If you would like to change your office location, the first thing you need to know is whether your new address is still in the same district as the previous one. If this is the case, then all you will be required to do is report your new company address to the tax office so they can change your taxation number.
Unfortunately, if your new address is in a different district you will need to amend numerous documents and permits such as: the location permit which will need to be signed by the district and subdistrict heads, as well as revise your Article of Association, Domicile Letter, Business License, Company Certificate Number and finally – advise the tax office so they that change your taxation account.
If I need help setting up a business or have any questions, how can I contact you?
MR: If you would like to set up a business or would like a free consultation – then feel free to contact me, either by T: +62 21 300 297 27 E: email@example.com or visit me in the LetsMoveIndonesia office, located in The Bellagio Mall, Mega Kuningan – The only walk in Visa & Company Establishment Agency in Jakarta!
Want to know more? Then check out our useful guides below by clicking the links:
About Mega: Mega Rizkiani is a graduate of Law from the Diponegro University. She has over 3 years’ experience setting up businesses and has helped hundreds of people turn their dreams into a reality.
In addition to Company Establishment, she can also help review and draft agreements, draft company regulations, register trademarks, set up business licenses, revise company documents as well as offer legal consultations.
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