Investing in a property in Lombok can be the right thing to do, while Bali is starting to have overpriced property and uncontrolled developments. Lombok offers affordable lands with a sea view. Despite the precautions to take with the project offered, here is a step-by-step guide on how to set up a company in Lombok.
Why invest in a company
One of the most common questions investors have is whether we should invest under our name or under a company name.
Legal reason
The only possibility for a foreigner to own a property is to acquire one of the different types of land certificates eligible in Indonesia. A foreigner can use a company PT PMA to purchase a freehold property and apply for the HGB (right to build and own a building). By purchasing the land with the company, the foreigner can apply for all necessary licenses and building permits under the company’s name, making Lombok property investment smoother and more secure.
Tax Reason
Despite some common misunderstandings, the company in Indonesia aligned with a stay permit (KITAS), which gives some tax benefits. As a reminder, DTT (double tax treaty) are applicable only to a certain type of financial movement.
Income generated in Indonesia has to be paid on an Indonesian company account. If this amount is sent overseas, it is subject to a withholding tax of 20% and VAT. A company can help to reduce the amount of tax in Indonesia and in the country of residence of the investor.
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Company structure
The only form of company allowing foreign investors is a PT PMA. This type of company is a Limited Liability Company. The company is open to 100% foreign investment for most of its activities.
To establish a company in Indonesia, a minimum of one director and one commissioner is required. The director is responsible for implementing policies and overseeing the company’s management. Shareholders must reappoint the director every five years.
Shareholders
The shareholders of a PT PMA can be individuals, foreign entities or other PMA. The individual foreigner must be over 18 years old to be a shareholder. A shareholder is not necessarily a member of the board of directors. Shareholders have to be present at the general shareholders meeting.
Commissioner
The company has one commissioner. The commissioner of a company is responsible for overseeing the director’s activities and reporting to the shareholders. The commissioner has the authority to suspend the director if their actions are not aligned with the company’s interests. The key responsibilities of the commissioner include:
- Ensuring compliance with Indonesian law
- Providing advisory support to the board of directors
- Approving the annual report
Director
The director of a company is written in the status of the company in the deed of establishment. The role of the director is important as the director of the company takes responsibility for the orientation of the company. A PT PMA can have several types of directors:
- President director
- Director
- Operational director
The director assumes the main responsibility and has the authority over the bank account of the company for the opening. In case of bankruptcy, the director cannot assure this role in another company for a period of 5 years.
Capital Requirement of the PT PMA
The capital requirements for a PT PMA (Foreign Investment Limited Liability Company) vary based on the company’s business activity and classification. Certain sectors, such as cryptocurrency or construction, may have higher capital requirements. However, the minimum declared capital for a PT PMA is 10 billion IDR.
Registration process
The registration process to start a company for Lombok property investment takes around 5 days. For other types of activities, it is important to check the required licenses.
When choosing the company name, it is important to understand the difference between a legal name and a trademark. The legal name of the company is not a logo and it is a combination of words.
- Certain words, like “OF,” are not eligible for registration.
- Combinations of symbols, letters, and numbers are also ineligible.
- Terms that oppose the Indonesian government, religion, or morality are prohibited.
- The name must align with the business activity and not be misleading, and it cannot resemble or represent a government institution.
The registration process can be done remotely as long as the shareholders are in measure to provide a power of attorney to the signing person.
AKTA or Deed of Establishment
The articles of association are governed by corporate law, with standardised terms. The AKTA cannot revoke shareholders’ rights to receive financial dividends. However, it may establish different classes of shares to limit certain voting rights or influence within the company. Key elements included in the AKTA are:
- Names of shareholders and their respective share classes
- Rights attached to each share and the nominal value
- Authorised, issued, and paid-up capital
- Company name and location
- Description of business activity
- Board of Directors and commissioners
- Methods and locations for holding shareholder meetings
- Procedures for profit distribution and dividend payments
- Duration of the company’s incorporation (typically 5 years)
After the registration of the deed of establishment, the Ministry of Law and Human Rights issues the approval (SK), and the company is officially registered with an address in Lombok.
Domiciliation
When it comes to a first investment, the company usually has no commercial address with a building permit (SLF) classifying the address as a commercial address. For investors buying a land or pre-establishing a company the address needs to rent a commercial address such as a service provider such as ILA Global Consulting.
Tax card – NPWP
The company has to get a tax number to register the tax number (NPWP) in order to declare its tax. In addition to the tax number of the company, the director of the company also needs an NPWP.
Business Registration Number – NIB
The NIB (13 digits) is the official business registration number of the company. Banks require this document to open a company bank account in Lombok. The business identification number is a kind of operating licence if no Sertifikat standards are required.
Corporate bank account
A company operating in Indonesia needs to open a bank account. The company can open a virtual account anywhere. For a bank account with a traditional bank, the bank may ask to open in the Lombok Branch. The process to open a bank account in Lombok takes a few days for a corporate account and one day for a personal account. A personal bank account can be opened for the director if the director has a KITAS.
KITAS for the director
The director of the company must have a KITAS and NPWP. As a foreign director, you are responsible for handling the company’s tax, which is crucial when managing your Lombok property investment.
EFIN and Electronic Certificate
The director is in charge of reporting the company’s taxes. For this purpose, the director needs to collect the following documents:
- EFIN
- Electronic Certificate
In addition to the EFIN of the company, the director of the company needs to collect its own EFIN. Failing to report the personal tax of the director and the company can result in a suspension and the impossibility of amending the company.
All those steps are important to follow in order to create and operate the company in Lombok and ensure a safe and profitable investment in a property in Lombok.
Also read: The Comprehensive Guide to Buying Property in Lombok
