Joint Venture and Joint Operation in Indonesia

The PT PMA is sometimes not the right structure for entities seeking temporary collaboration. In such cases, Joint Venture Indonesia offers a flexible solution, allowing two entities to work together for a specific project or timeframe without the need to establish a new company.

Commonly called Joint Venture and Joint operation, Indonesia also provides more flexible structures for companies, developers willing to create an entity for a certain period of time or a specific project.

Less known than other types of structure such as PT PMA, Indonesia recognizes Joint Operation as KSO (Kerjasama Operasi) and Joint Venture as PT PMA with a limited time and project.

Difference between Joint Operation and Joint Venture Indonesia

Joint Venture

A Joint Venture (JV) is a business arrangement in which multiple parties collaborate to achieve a specific goal, such as a new business, project, or investment. In a JV, each party retains its independent legal status while sharing control. The agreement defines the risks, profits, and losses.

For foreigners a joint venture can be seen as a new entity between two or more parties. In Indonesia, two parties can create a PT PMA with a limited timeline for a specific purpose in order to collaborate on a market, specific product, development etc.

Joint Operation

A Joint Operation (KSO), also known as Kerja Sama Operasi, is a collaborative business between two or more parties in Indonesia. This partnership occurs on a specific project and does not necessitate the creation of a new legal entity such as PT PMA. KSOs are frequently utilized in sectors such as infrastructure, construction, property development.

In Bali KSO is an alternative for developers, landlords and contractors willing to collaborate on a specific project in order to optimize the tax of the project.

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Benefit of a KSO in Bali and Lombok

A KSO is established through a contractual agreement between the parties involved. Unlike a joint venture, it does not constitute a separate legal entity. Instead, the parties involved share control and responsibilities within the KSO.

This includes contributing resources such as capital, expertise, and equipment and jointly executing the project. The agreement defines a profit-sharing model for the project. Each party is responsible for fulfilling its financial obligations, including tax and accounting responsibilities, under its own legal structure.

How to optimize tax as a developer in Bali and Lombok with a KSO

For example, a developer willing to develop land but not having the capital to invest in it might collaborate with a landowner in order to define profit sharing. While one party brings the land as a contribution, the other party brings sales and marketing in order to build and sell villas. The benefit here is that both can collaborate without having to open a company together and they are entitled to collaborate only for the duration of the project.

Another type of collaboration can be between a developer and a contractor. In order to simplify the sales, the developer and the contractor can create a KSO. Payment of the clients will go to the KSO and the payment related to the construction will go to the contractor while the payment related to the marketing and sales will go to the developer without having to pay double tax. Indeed if the developer receives payments from the clients, the developer is entitled to pay tax to the project management. Once the developer receives money, the developer has to pay the contractor and withhold tax. The same amount of money is taxed 2 times for one purpose.

Read More: How To Establish A PT PMA In Bali

How to open a KSO in Indonesia

Define the terms and conditions

In order to prepare the agreements, both parties need to discuss together on the following points. The notary and ILA will prepare the agreement based on the business orientation defined by the parties.

• Profit sharing
• Scope
• Duration
• Exit Strategy
• Roles and Responsibilities
• Tax responsibility
• Penalties
• Dispute resolution

Registration with the notary

A Kerjasama Operasi KSO requires a ⁠Akta pendirian. This deed is established by a notary in Indonesia based on terms and conditions defined by both parties.

Tax registration

As other types of entity, a KSO can obtain a tax number called NPWP. The tax number allows the entity to invoice clients, to collect income and have expenses and pay taxes.

Bank account opening

In order to control the income, expenses and profit of the KSO, the opening of a bank account is a secured solution for the members of the KSO. The expenses and sales are done directly at the bank account level. In order to open a bank account, the KSO need to provide the document below:

• Akta pendirian KSO
• ID/ Passport of the managing members of the KSO
• Akta pendirian and Ministy approval of the member of the KSO and all documents such as ⁠ ⁠⁠NIB + sertifikat standar, ⁠⁠NPWP and ID of the directors

Although developers and actors in Bali or Lombok are not really aware of it, KSO can be a useful structure depending on the type of project and collaboration.