Thinking to open a business in Indonesia? Indonesia is the biggest economy in Southeast Asia with the biggest domestic market in the region and with extraordinary natural resources. Despite the reason, foreigners and companies are looking to invest in Indonesia, from relocating to Indonesia to expand their business or trading with the country.
Opening a business in Indonesia takes a few days to a few weeks depending on the activity and the region. While most foreigners are looking to invest in East Indonesia and develop new businesses, Jakarta continues to attract big enterprises.
In the last decades, foreigners have started to move from Jakarta to Bali and East of Indonesia to invest in several sectors, from real estate to new technologies, tourism, and natural resources. However opening a business in Indonesia depends on a few factors and legal structures.
Legal structure to open a business in Indonesia
The first question foreigners and companies have is do they need a local partner to open a business in Indonesia. The response is most of the time NO. Indonesia allows foreigners to open a business if the activity is not on the restricted list.
Since 2021, the list authorizes foreigners to open a company or a business with most of the activities. As a foreigner or foreign company, it is possible to open a business with 100% ownership without having to partner with a local Indonesian. The type of company is PT PMA.
Example of restricted activity in Indonesia for foreigners
- Tattoo shop
- Journalist
- Barbershop
- Military production
- Facial treatment
- Laundry business
Most of those activities are related to small businesses or to sensitive activities. In other hand some activities are partially authorized to foreigners.
Example of activity partially opened in Indonesia to foreigners
- Boat ownership (49%)
- Architect (67%)
- Travel Agency (67)
Type of company opened to foreigners
Foreigners can open 2 types of structures in Indonesia. A limited liability company (PT PMA) and a Representative office (KPPA, KP3A, BUJKA). Depending on the purpose of the business, individuals or companies may choose to open a company or a representative office.
Representative office in Indonesia
At the difference with the PT PMA the Representative office in Indonesia cannot issue invoices to clients. The representative office is an entity used to represent a parent company from overseas.
This entity can hire employees and sign contracts on behalf of the parent company and is in other words a cost center. This type of entity is for companies looking to trade with Indonesia or having employees here working for an oversea company.
The advantage of the representative office is that no capital is required but no profit can be done at the representative office level.
PT PMA in Indonesia
On the other hand, the PT PMA is a legal entity allowed to conduct business in Indonesia and to issue invoices and profit. The PT PMA requires a share capital and needs to obtain a business license (NIB). The business licence may need some extra verification in order to obtain a Sertifikat Standard (SS).
A PT PMA needs 2 shareholders minimum and those shareholders can be individuals or companies. The company needs at least one director and one commissioner who can also be the shareholders. The director of the company needs to apply for a KITAS (Stay permit) if the director is a foreigner, in order to obtain a tax number.
The process to open a company in Indonesia takes 1 week to 2 weeks depending on the business activity. Some activities need some verification such as Spa, Restaurant, Real Estate Broker and some additional weeks might be needed.
Registering a company in Indonesia has never been easier
Setting up a business abroad can be challenging with so many documents, laws and regulations to consider. Luckily, the process will be a breeze, and we’ll give you expert advice on which business structure and setup will fit your needs.
Reach out to the ILA team today to set up a free consultation or read more about the company registration process.
How to open a PT PMA in Indonesia
You can open and register PT PMA in Indonesia remotely. The shareholders need to provide their passport and sign and appear in front of a notary for the deed of establishment. The process can be done remotely through a power of attorney.
Once the deed is established (AKTA), the company obtaining the ministry approval (SK) can apply for a tax card (NPWP) through the Coretax system before applying for the NIB (Business licence). As mentioned above some activities may need some additional licence called Sertifikat Standard (SS).
- Signing Power of Attorney or Appear in front of notary
- Deed of establishment (AKTA)
- Ministry Approval (SK)
- Tax Card (NPWP)
- Business Licence
- Sertifikat Standard for some activities
Once the company is created the director needs to apply for a personal tax number (NPWP). As a foreigner a way to obtain the tax number is to apply for a KITAS as investor or working KITAS as director. ILA Global Consulting can assist you with opening your company or representative office in a few days. You can contact us to know more about the process and requirements.
Also Read: How Find a Good Notary and Lawyer in Indonesia.
How to open a bank account for the business
The banking system in Indonesia is very modern and offers perfect solutions for day to day operations. Some banks offer multi currency accounts allowing you to receive money in several currencies without conversion and high fees.
The director needs to come to Indonesia to open the bank account. However if the director has a KITAS some bank allows to do it remotely. The bank opening takes from 2 days to 1 week. Most banks offer help in English.
How to obtain a resident permit with your business
Foreigners can apply for a residence permit (KITAS) once they have opened a company. They can supervise their investment as shareholder/ Director or obtain a working permit as director if they want to have an operational role.
The investor KITAS is valid for 2 years and is renewable. The minimum share value under the name of the applicant is 10 billion IDR for being able to apply for an investor KITAS. The person can sponsor his family and bring a spouse and kids to Indonesia. Their child or spouse KITAS will follow the duration of the sponsor.
After 5 years under the same KITAS, the foreigner can apply for a KITAP (Permanent stay permit).
We recommend contacting us to know more about which visa will be more suitable for your business activity and the role you wish to have in your company.
Obligations of a company in Indonesia
A company has several obligations. Opening a business requires to have:
- A commercial address (We at ILA provides some virtual office)
- Monthly payment of Social Security (BPJS)
- Monthly income tax if the company is under specific regime
- Monthly tax payment of local tax
- Monthly tax payment on salaries
- Withholding tax payment each month following the expenses
- Annual tax report between January and April
