Indonesia attracts foreign investors because the market is quite large in this country, with it having the fourth-largest population in the world. Competition is also not as stiff in these parts. But did you know even businesses with only 1% foreign ownership are foreign companies (PT PMA)?
This article discusses important points about foreign-owned company registration in Indonesia, including:
- Foreign ownership limitations
- Minimum paid-up capital and other requirements
- The step-by-step process of setting up a PT PMA
- Alternatives to registering a company in Indonesia
Table of contents
What is a foreign-owned company in Indonesia?
All foreign companies in Indonesia are PT PMAs (Perseroan Terbatas Penanaman Modal Asing). This means “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.
A PMA is not the only option for someone who wants to conduct business activities in Indonesia. 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 just hire employees in Indonesia, you can use the employer of record service.
Foreign ownership limitations
Depending on the business classification, foreigners may hold 100% ownership of a business. However, some business lines do not allow foreign ownership at all. The Negative Investment List (DNI) lists restricted industries. This is usually revised every three years.
Negative investment list in Indonesia
The negative investment list has a grandfather clause. This means revisions to the negative investment list are not retroactive. Any changes made will not affect already registered companies. Even if regulations for your industry change, you will not have to sell or transfer your shares to a local shareholder.
Requirements for setting up a PT PMA
#1 Paid-up capital
The minimum paid-up capital for a foreign-owned company in Indonesia is Rp. 2,5 billion (~175,000 USD).
Shareholders will have to sign a capital statement letter. This is a letter saying that the shareholders have sufficient funds for the capital. Representative offices don’t have capital requirements but they also cannot earn revenue.
#2 Structure of a 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.
At least one director should be a resident of Indonesia and must have a tax card (NPWP). The resident director can be either an Indonesian or a foreigner.
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 use a nominee 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.
Company registration in Jakarta
Regulations do not allow the use of residential addresses as company addresses. Make sure your company is located somewhere that has the building permit allowing it to operate as an 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. The address is in the prime area of Mega Kuningan. We can register your business in 4 days if you use our virtual office service.
You can maintain your virtual office as the official address even whether you move into a physical office or not. This also saves you from having to update your Articles of Association.
Read more on finding an office space in Jakarta or Bali
How to set up a PT PMA in Indonesia
The establishment process for most business lines goes through a centralized system, One Single Submission. This has made registration easier and faster. From about 10 weeks, now registration can be completed in 1 to 2 weeks if your business does not need additional licenses.
The step-by-step process of PT PMA registration
Step 1: Deed of Establishment
Emerhub will check your planned business activities and recommend the business classification 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. That being said, the business classification with the least restrictions is not always the right choice.
We will also determine the maximum allowed percentage of foreign ownership relevant to your business. The Ministry of Law and Human Rights must also ratify the Deed of Establishment.
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.
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|
*Getting the tax card within a day is possible if your company is registered using our virtual office service.
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.
After 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
- 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
It is possible to incorporate a new company in Jakarta through Emerhub. We can complete the steps detailed above for USD 2,000. Use the form below to get in touch with our consultants to get started with your company registration.
Tell us about your planned business activities in Indonesia
We collect all the required information and file the application
Company registration in 2-4 weeks
Receive additional industry-specific licenses (if required)
Alternatives to company registration in Indonesia
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
Another option is to set up your business using a nominee company. A nominee company acts as the registered owner of a business on behalf of the actual owner.
You can also register your business following regulations set for your nominee, a local company. This enables you to operate in Indonesia without having to comply with regulations set for foreign companies. This means that you will not have to comply with minimum capital requirements or restrictions imposed on the Negative Investment List.
Your nominee company will be the registered business owner so it is important to find a partner who has your best interests. Before entering into any partnerships, you should have lawyers draft a set of legal agreements that will protect your rights as the owner. As your nominee company, Emerhub will be your business’ registered owner but you will maintain full control over it.
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
How to start with company registration in Indonesia
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.