Company Formation in Indonesia
Updated on Thursday 07th December 2023
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Indonesia has the largest economy in Southeastern Asia, being also a country that has recently started to attract foreign entrepreneurs. During the last years the growing economy has been controlled mainly by foreign companies and by private Indonesian businesses.
Therefore, Indonesia can be an attractive business destination for investors interested in offshore incorporation. If you want to set up a business here, do not hesitate to address our team of consultants in company formation in Indonesia.
Indonesian types of business entities
In order to set up a company in Indonesia, you need to decide which type of business is the best choice for you: the wholly foreign owned entity, the limited liability company, the joint venture, the branch, the representative office or the nominee trading company.
Although each type has its advantages, the most commonly preferred by foreign investors is the limited liability company. This company type in Indonesia is also known as PT (Perseroan Terbatas) and it needs approval from the Capital Investment Coordinating Board prior to conducting any business there.
Another convenient type of business that a foreign investor can choose to set up in Indonesia is a foreign owned company. Also known as PMA (Penanaman Modal Asing), it can be 100% foreign-owned and controlled for the first fifteen years.
Please know that the PT and the PMA (or the PT PMA) are similar legal entities, they are incorporated following the same regulations, only that the latter – PMA (also referred to as PT PMA) defines a limited company with foreign capital.
The registration procedure is the same, only that there are differences when referring to the capital and the requirements for the shareholders, therefore it is important to be mindful of such differences when initiating the process of offshore company setup in this country.
How to open a PT PMA in Indonesia
The requirements for opening a company in Indonesia as a PT PMA are:
- a minimum of 1 director that has to be an Indonesian resident;
- at least 2 shareholders;
- 1 commissioner (similar to a chief operating officer or a senior manager of a company);
- a share capital of $660,000 (the capital requirements used to be of $300,000, but the law has recently been modified);
- an investment plan for $1 million required.
An important advantage when registering a company in Indonesia is that a PMA can operate anywhere in the country. When referring to the registration of a PT PMA, foreign investors should be aware of the following:
- a PT PMA allows 100% foreign ownership;
- if the company has even a small fraction of shares owned by foreign investors, even 1% of the total shares, according to the law, the company will be considered a PT PMA;
- several regulations concerning company formation in Indonesia have been modified following the enactment of the Government Regulation in Lieu of Law No. 2 of 2022;
- as said above, the capital requirements of the PT PMA were increased, as per the rules of the Investment Coordinating Board of the Republic Indonesia Regulation No. 4 of 2021;
- investors have good news, as certain sectors have been liberalized under the Presidential Regulation 10 of 2021.
Therefore, offshore company formation with foreign ownership can now be initiated in fields such as telecommunication, transportation or energy. Please mind that business permits are necessary and they vary based on the type of activity the company will develop. Among other basic requirements, investors must open an offshore bank account.
Steps for a company registration in Indonesia
You first need to choose a name for the company and then pay a fee for obtaining the name approval. The company's documents need to be notarized. An application for the establishment certificate approval must be submitted to the Ministry of Law and Human Rights. Then you have to apply for the certificate of the company domicile and receive the approval.
Furthermore you have to pay the fees for legal services at a bank, then apply for a permanent business trading license at the Ministry of Trade and also obtain the company's registration certificate at the Local Government Office.
Is the representative office available in Indonesia?
Is the representative office available in Indonesia?
Yes, foreign businesses can also expand on the Indonesian market through a representative office, as long as their intent is to develop non-commercial activities. The representative office (also referred to as a liaison office) is a structure that can be set up only for activities that do not create a profit for the foreign company.
The procedure for setting up the representative office is similar to the one for company incorporation in Indonesia. Many documents must be prepared and obtained from local authorities and our consultants can represent you throughout these formalities.
Just like in the case of commercial businesses, investors must apply for suitable licenses. The license for the representative office can be obtained from the Ministry of Law and Human Rights of the Republic of Indonesia.
Among other basic obligations, the establishment must have a registered address in Indonesia. This is a mandatory step for offshore company setup regardless of the country and the company type, therefore the investors must seek appropriate locations available for rent.
Types of representative offices in Indonesia
Unlike other countries, Indonesia recognized 4 different types of representative offices, as follows:
- the representative office (RO) set up by a foreign company operating in the electricity industry (JPTLA);
- the foreign RO (that can be set up by the majority of companies);
- the RO set up by a foreign company in the construction sector (BUJKA);
- the RO of a trading foreign company (TRO).
These 4 categories are recognized under the Government Regulation in Lieu of Law No. 2 of 2022. The said legislation has simplified the previous incorporation procedure. Therefore, if you are interested in offshore incorporation as a RO, you should know that now the formalities have been simplified.
The whole process of registering a company in Indonesia can take several weeks to be completed depending on the type of business setup. For more information about forming a company in Indonesia, please contact our specialists.