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Indonesia presents attractive opportunities to foreign investors looking to do business in emerging markets. To legally run a business in indonesia as a foreigner, you need to set up a PT PMA. This entity allows you to generate revenue streams and profit from business conducted within the Indonesian territory.
Registering a PT PMA provides companies with foreign investors with the same rights and responsibilities as a local company in Indonesia. This includes the ability to build on and use land, participate in local tenders and sponsor visas that allow foreign employees to live and work legally in Indonesia.
Read on to find out more about the requirements and the steps you need to take to register a PT PMA in Indonesia.
All foreign companies in Indonesia are PT PMAs (Perseroan Terbatas Penanaman Modal Asing) which means a “limited liability company with foreign direct investment.”
A company is a PMA if a foreign national or foreign company holds any shares. It doesn’t matter if it’s 100%, 51% or even 1% – if there are foreign shareholders, it is a foreign-owned company.
People commonly believe that having local partners makes company registration smoother, but this is not true. In fact, it only really makes a difference if the local partner owns 100% of the shares.
Benefits of incorporation in Indonesia
Upon completion of the establishment process, you can start running your business in Indonesia and conduct activities such as:
- Buy property and other assets on behalf of your company
- Register your products (see cosmetics, food, IT equipment)
- Obtain industry licenses, such as import license to import goods to Indonesia
- Start other preparations for your operation, such as but not limited to hiring staff, preparing office renovations, etc.
- Proceed to obtain work and stay permits for foreign employees in your company
Foreign company ownership limitations
As of 5 March 2021, changes to omnibus law in Indonesia has opened up most business classifications to 100% foreign ownership.
There are now 45 business classes that maintain a partial limitation on foreign ownership. The proportion of these companies that are open to foreign ownership depends on the business line in question.
A total of 58 business classes remain closed to foreigners. These areas of business are reserved for small to medium businesses with 100% domestic ownership and include:
- Small construction firms
- Small accommodation services (guest houses, villas, 1 star hotels)
- Services such as laundrettes, barbershops, beauty salons)
- Retail that is not online or in a department store
- Business types under national protection such as the cultivation of marijuana
1 Paid-up capital
The minimum paid-up capital for a foreign-owned company in Indonesia is Rp. 10 billion (~700,000 USD).
Shareholders will have to sign a capital statement letter saying that the shareholders have sufficient funds for the capital requirements.
2 Structure of a foreign owned company in Indonesia (PT PMA)
Every limited liability company in Indonesia must have at least two shareholders. They can be individuals, corporate shareholders, or both.
Commissioners and directors
You must appoint at least one commissioner and one director. The commissioner is the supervisor of the director(s) and can be a non-resident.
The directors are in charge of the daily operations of the company. At least one director should be a citizen or a resident of Indonesia and must have a tax card (NPWP).
The foreign director may apply for a work permit after the incorporation of the company. While waiting for the work permit, the company should appoint a local director, or professional director service.
Read more about commissioners and directors of a PT PMA
3 Business location
Indonesia is a decentralized country. A lot of the government’s work takes place at the district level. Because the local district is in charge of local permit approvals, it is important to choose your business location before starting the registration process.
If you would like to find the best district of Indonesia to run your business, get in touch with one of our experts for free advice.
Requirements for your company address
Different areas of Indonesia have different rules for the registered address. In Jakarta, the address must be in a building with a building permit (IMB) that allows the operation of an office.
Deciding to use a virtual office
A virtual office can significantly lower your overhead costs. You also won’t have to worry about building permits and if you can use your address as an office.
Completing the registration for your business can also be much faster when you use a virtual office service. Emerhub provides a virtual office service in Jakarta and Bali. We can register your business in five days if you use our virtual office service.
You can maintain your virtual office as the official address even after you move into a physical office. This also saves you from having to update your Articles of Association.
The establishment process for most business lines goes through a centralised system called One Single Submission (OSS). This has made registration easier and faster. The registration of a PT PMA used to take 10 weeks, with the OSS, registration can be completed in 1 to 2 weeks if your business does not need additional licenses.
The step-by-step process for PT PMA registration
Step 1: Deed of Establishment
Emerhub will check your planned business activities and recommend the business classification (KBLI) that will work best for you. It is important to choose the right classification for your business so you won’t run into any issues in the future. The Ministry of Law and Human Rights ratification of the Deed of Establishment will be obtained during this step.
Step 2: Tax Registration
Upon the establishment of the company, the next step is to get a Tax Identification Number (NPWP) from your local tax office for your company. As soon as you are a registered Taxpayer, you must adhere to several compliances.
Step 3: Identification Number to Operate/Nomor Induk Berusaha (NIB)
Next is the registration of your legal entity in the One Single Submission System (OSS). After this, you will receive your company’s Identification Number to Operate (NIB).
A NIB is a unique number that identifies your company profile in Indonesia. It also serves as:
- Your import license (previously API-U)
- Customs Identification Number (NIK)
- Your business registry number (previously TDP)
The NIB also automatically registers your PT PMA under Health and Social Security System (BPJS Kesehatan dan BPJS Ketenagakerjaan)
Step 4: Operational License/Commercial License
The business’ operational license/commercial license is usually issued on the same day as NIB. This is applicable if there are no other requirements for your business, for instance, with trading and consulting businesses. However, other business activities may need additional fulfillment. In cases like this, it can take months before the government grants your business a license. For example, fintech companies in Indonesia need an OJK license.
Timeline of foreign-owned company registration in Jakarta
|Process||Timeline in working days|
|Approval of company name||1|
|Minute of the Deed of Establishment|
|Deed of Establishment||1|
|Ratification from MOLHR on Deed of Establishment|
|NIB and Commercial License/Operating License||1|
The above timeline applies to businesses registered in Jakarta. Registration usually takes longer in other places and would depend on the local government of that area. Please also note that the timeline above may change depending on the specifics of your business.
After the registration process, Emerhub can facilitate opening a bank account for your company. We have a special arrangement with several banks, and you will not need to make a personal appearance at the bank.
Accelerated Company Registration Process in Jakarta
The decentralised nature of Indonesian government means that there are significant differences in ways the local permit are processed. Even within Jakarta, which itself is divided into five different municipalities, the process varies from one to a couple of weeks.
Emerhub Indonesia has built a proprietary online system that cuts down several of the time-consuming application processes. This allows us to provide the fastest company registration service in Indonesia. As long as you are using Emerhub’s registered address and your industry doesn’t need additional industry licenses, the registration will take just five working days.
Buying a ready-made shelf company
To skip the whole registration and establishment process, you can purchase a shelf company. Doing this will allow you to issue invoices, sign contracts, or participate in tenders immediately.
However, make sure the shelf company has the necessary licenses for your business classification. Emerhub can provide you shelf companies or verify whether the shelf company you wish to buy has all the required permits.
Learn more about shelf companies in our previous article about buying a shelf company in Indonesia
Nominee company in Indonesia
You may have come across the term “nominee shareholder” when talking to other foreign investors doing business in Indonesia. The phrase refers to using a local person or entity to hold shares on your behalf. While common in many countries, in Indonesia it does not offer you any legal protection. The “nominee” does not have any obligation to hand over the shares to you.
If you operate in an industry where the foreign ownership is restricted, there are better solutions that are both legal and protect your assets. The specific legal arrangement depends on your planned activities. Reach out to Emerhub to discuss your specific case.
Representative office in Indonesia
A PT PMA is not the only option for someone who wants to conduct business activities in Indonesia or simply just wants to relocate personally. If you want to set up an office in Indonesia but do not intend to generate income from local activities, you can open a representative office instead. If you’re looking to personally relocate to or hire employees in Indonesia, you can use an employer of record service.
Outsourcing business processes in Indonesia
Setting up a legal entity is not always the fastest or the most cost-effective way to enter a new market. If you wish to start operating immediately or to test the market first, using an outsourced operations model would be the best option for you.
It allows you to do business activities like earn revenue, provide services, and conduct sales without establishing a local company or meeting the minimum foreign investment requirements.
Some of our services include:
Read more on how to enter emerging markets by using outsourcing services
If you have any additional questions, feel free to reach out to our consultants via [email protected] or by filling in the form below. Or proceed straight to company registration. We also set up companies in Vietnam, the Philippines, Myanmar, Bangladesh, and Pakistan.
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