How to Register Small Business in Indonesia?

Corporate Secretary Service – The Indonesian market has potential and competitive value in business development. Abundant natural resources, strategic location, and a large workforce make Indonesia a promising country for investment. However, many complex issues must be considered for foreigners who want to do business in Indonesia. For example:

• What type of legal entity is your company? Is it a representative office or a company with direct foreign investors?
• What sector will your company be involved in?
• Is the industry open to foreign investors? If so, what is the percentage of ownership?

How to Establish a Foreign Company in Indonesia

You must know and understand the minimum capital requirements, regulatory framework, organizational structure, mandatory activity reports, tax regulations, utilization of Indonesian labor, and others. Below is how to set up a foreign company in Indonesia:

Foreign Business Entity as Representative Office

This type of business entity is more suitable to be established as the initial stage of the business. Some of its advantages are:

• Relatively quick and easy to manage.
• It does not require a large capital deposit or investment.
• Minimal paperwork; you are only required to file income tax for employees and office space tax.

However, this method may need to be more flexible for some businesses. Your company will have a legal presence in Indonesia but will not be allowed to make profits from sales or engage in business transactions. So, a representative office is more appropriate for market research and marketing purposes before establishing a full-fledged legal entity.

Foreign Business Entity PT. PMA

Foreign Investment (PMA / Penanaman Modal Asing) establishes a foreign company in Indonesia that is regulated by law. PMA is a limited liability company (PT). Meanwhile, Foreign Direct Investment (FDI) is a capital investment or investment that comes from foreign parties or abroad. FDI in Indonesia is regulated in:

• Law No.25/2007 on Capital Investment.
• Law No.40/2007 on Limited Liability Company.
• Presidential Regulation No.39/2014 on the List of Closed and Open Business Fields under the DNI (Negative Investment List).

Any business with foreign shareholding is required to register as a PT PMA. Meanwhile, the DNI details what business fields are restricted with specific requirements for foreign investment and what sectors are open for full ownership of foreign companies.

Read Also: Can a Foreigner Own 100% of a Business in Indonesia?

Any foreign company registering in Indonesia must obtain investment approval from the Investment Coordinating Board. After that, you still have to apply for several licenses at the local government. Consider hiring a local consultant like PortCorp, as it will be very useful for you to take care of these legalities and licensing issues.

Procedures for Establishing a PT. PMA

It would help if you went through procedures when setting up a PT. PMA, including:

• Approval of the company name from the Ministry of Law and Human Rights.
• Bagging the approval of the Principal License from BKPM, the Investment Coordinating Board.
• Drafting the Articles of Association (by a Notary).
• Obtaining the company’s Deed of Establishment from the Ministry of Law and Human Rights.
• Obtaining a taxpayer number.
• Obtain a Tanda Daftar Perusahaan (TDP) or Company Registration Certificate from the local government.

Requirements for Establishing a Foreign Company

Setting up a foreign company in Indonesia may seem complicated and long. However, the process can be easier and faster if you can fulfill all the requirements. What are the requirements for establishing a PT PMA in Indonesia?

Minimum capital requirement

Regardless of the industry, the minimum capital requirement for foreign investor-owned companies is $1.2 million or around Rp10 billion. This figure does not include the price of land and buildings. Investors must deposit a minimum of IDR 2.5 billion into a bank in Indonesia and include a detailed investment plan on the use of capital.

Shareholder requirements

According to the law, PMA must be a PT business, so the company needs shares. You need at least two shareholders, one each as a commissioner and director. Foreigners can be commissioners (with a work visa), while the managing director must be an Indonesian citizen.

Location requirements

Foreign investors can set up a company anywhere in Indonesia. However, the government sets a special condition: Industrial businesses must be established and run in Industrial Estates.

Don’t worry about developing your business by setting up a company in Indonesia, because Portcorp is here as a solution for your business. Portcorp is your comprehensive corporate secretary service in Indonesia. With our presence, you can get a dedicated company secretary to support you to what you need. Our company secretaries will track deadlines and file paperwork so your business keeps running smoothly. Contact us now for your business success in the future!