Looking to start a business in Indonesia as a Foreigner? You must navigate the complex legal requirements and process to stay compliant with local laws and regulations.
In this article, we will walk you through the essentials of starting a business in Indonesia as a foreigner, including the legal requirements and step by step process.
Suitable Business Entities for Foreigners in Indonesia
In Indonesia, Perseroan Terbatas (PT) is the predominant type of business entity, which can be categorized as either a local PT (fully Indonesian-owned) or a PT PMA (a company with foreign ownership).
To start your business in Indonesia as a foreigner, the most popular option is to register a PT PMA. A PT PMA is the Indonesian counterpart of an LLC which permits up to 100% foreign ownership in approved sectors.
Similarly, for foreign companies looking to expand their business operations in Indonesia, common business structures in include:
- Representative Office: This allows foreign firms to conduct market research without engaging in direct sales.
- Branch Office: Functions as an extension of foreign companies within particular industries.
- Yayasan (Foundation): for non-profit organizations
Refer to business entities in Indonesia for more information on types of legal entities.
Legal Requirements for Starting a Business in Indonesia as a Foreigner
When starting a business in Indonesia as a foreigner, you must fulfill several requirements such as:
A. Shareholders and Corporate Officers
- Minimum of Two Shareholders – companies must have at least two shareholders, which can be either individuals or corporate entities.
- At Least One Commissioner – responsible for supervising the directors on behalf of the shareholders. While they function similarly to board members, a commissioner can also hold shares in the company.
- Minimum of One Director – manages daily operations of the business. The director must either be an Indonesian citizen or Indonesian resident and possess a personal tax identification number (NPWP).
B. Paid-Up Capital
For setting up a PT PMA, the required minimum paid-up capital is IDR 2.5 billion (approximately USD 150,000*). This amount must be paid by the shareholders as soon as company is incorporated in Indonesia.
*may vary depending on current exchange rate
C. Commercial Address for Business
To register your local or foreign owned company in Indonesia, it is mandatory to have a registered business address.
While this address does not necessarily need to be the location where day-to-day operations occur, it must comply with local regulations including zoning laws or disruption of the local community.
Businesses can opt for a physical office space or utilize virtual office services. However, using a residential address as a business location is generally prohibited unless formal approval from local authorities is obtained.
How to Start a Business in Indonesia as a Foreigner
Before you start operations in Indonesia, you need to register your company with the country’s One Single Submission (OSS) system. This system has streamlined the registration process, significantly reducing the time required for company formation from 10 weeks to 1-2 weeks if no additional licenses are required.
Here’s the step-by-step process to start a business in Indonesia as a Foreigner:
1. Business Name Reservation
The first step in registering a company is to reserve a unique name through the Ministry of Law and Human Rights. The proposed name must consist of at least three words and adhere to specific guidelines.
For PT PMA, names can be in English, whereas local PTs must use Indonesian names. Additionally, the name must not be in use by another entity, should not breach moral standards, and must be written using Latin characters.
Check out our Indonesia company name check tool to see availability of your preferred business name.
2. Preparation of Deed of Establishment
A Deed of Establishment is a formal document that includes your Articles of Association which outlines your intended business activities and information about shareholders. This document must be drafted in Indonesian and notarised by a local notary public.
Our local experts will assist you in preparing your company’s Deed of Establishment. We will identify the appropriate business classification (KBLI) as per your planned business operation in Indonesia and handle necessary submissions on your behalf..
3. Application Submission to MOLHR for Business Registration
After notarization, the Deed of Establishment must be submitted to the Ministry of Law and Human Rights (MOLHR) for approval.
The MOLHR conducts a thorough review of the founding documents, including the business name and proposed activities. Upon approval, the Ministry issues a decree that formally recognizes your company as a legal entity.
4. Secure the Tax Identification Number (NPWP)
Once your company is incorporated, Emerhub can help register for a Tax Identification Number (NPWP) with the Directorate General of Taxes at your local tax office.
5. Application for Business Registration Number (NIB)
The NIB serves multiple purposes: it acts as your company registration certificate, import license, and facilitates enrollment in social security programs.
Our local experts will secure your Identification Number to Operate (NIB) through the OSS after business incorporation.
6. Obtain Mandatory Licenses and Permits for Business Operations
Depending on your business activities, additional licenses and permits may be required to operate legally in Indonesia.
Common licenses include:
- Commercial License (SIUP) for trading activities
- Industrial License (IUI) for manufacturing
- Tourism License (TDUP)
- Construction Services Business License (IUJK)
- Halal Certification
- BPOM Certification for food, beverages, cosmetics, or pharmaceuticals
Start your Foreign-owned Business in Indonesia with Emerhub
Emerhub has been helping foreign investors set up and expand their operations in Indonesia and other southeast asian markets since 2011. Our local experts are well versed in Indonesian regulations and will help you set up your business in Indonesia.
We handle every step, from business registration to securing all required permits and approvals, ensuring a smooth and streamlined process.
Fill out the form below, and we will connect you with one of our business advisors.