Legality Guidelines for Foreigners If They Want to Do Business in Indonesia

Corporate Secretary Service Indonesia – Indonesia, as a country with the world’s fourth-largest population and a booming economy, attracts many foreign nationals who want to start or expand their businesses here. However, to start a business Entertainment/Impresario in Indonesia, foreigners must understand the various regulations, procedures, and business environment. Here is a quick guide to help foreigners who want to do business in Indonesia.

1. Types of Businesses that Foreigners Can Own

Foreigners can own a business in Indonesia through various forms of business entities, including:

• PMA (Foreign Capital Investment): This is a form of company that allows foreigners to own a majority or full stake in the business. A PMA is required if the foreigner wants to have full or majority control of the business.
• Cooperation with a Local Company: Foreigners can also invest in an existing business or start a new venture by partnering with a local company. This often requires a cooperation agreement and a clear division of shares.

2. Permitted Business Fields

Not all business fields in Indonesia are open to foreign investment. The Indonesian government regulates certain sectors through the Negative Investment List (DNI), which states which sectors are closed to foreign investment, restricted sectors, and fully open sectors. Before starting a business, foreigners should ensure that the chosen field of business is not included in the restricted list.

3. The Establishment Process

• Choosing the Form of Business Entity: After determining the type of business, foreigners must choose the appropriate form of business entity. The most common form is PT PMA, which requires approval from the Investment Coordinating Board (BKPM).
• Legal and Licensing Process: After determining the form of business, the next step is to register the company with BKPM, obtain approval in principle, and then apply for other necessary permits such as SIUP (Surat Izin Usaha Perdagangan), TDP (Tanda Daftar Perusahaan), and environmental permits if required.

4. Visa and Residence Permit

For foreigners who wish to live and work in Indonesia, several types of visas and permits are required, including:

• Business Visa: Required for temporary business visits, such as attending meetings or holding meetings with business partners.
• Limited Stay Permit (KITAS): Required for foreigners who wish to stay longer and work in Indonesia. KITAS is generally valid for one year and can be extended.
• Investment Visa (VITAS): Used for foreigners who wish to invest in companies in Indonesia. VITAS also allows foreigners to apply for KITAS.

Read Also: What is a Retirement Visa in Indonesia?

5. Finance and Taxation

Bank Account Opening: For business Entertainment/Impresario operations, foreigners can open a company bank account in Indonesia. Banks usually ask for company documents and official licenses before opening an account.

Taxation: All business entities in Indonesia, including those owned by foreigners, must comply with tax regulations. Foreigners must understand the applicable income tax, value-added tax (VAT), and other taxes.

6. Labor

Hire Local Labor: Indonesia has regulations that encourage foreign companies to hire local labor. There is a limit to the number of foreigners that can be hired, and the company must provide training for Indonesian workers.

Work Permit: Foreigners employed in Indonesia must have a valid work permit. This permit is usually applied for at the same time as the KITAS.

7. Business Culture

Business Ethics and Norms: Understanding and respecting local culture is key to successfully conducting business in Indonesia. Business in Indonesia often involves strong personal relationships, and a friendly and respectful approach is highly valued.

8. Challenges and Opportunities

Challenges: Bureaucracy, complex regulations and cultural differences can be major challenges for foreigners. However, understanding and cooperating with local parties can reduce these barriers.

Opportunities: With a large population and growing economy, Indonesia offers many business opportunities in various sectors, from manufacturing to technology to tourism.

Starting a business in Indonesia as a foreigner is challenging, but with the right preparation and a good understanding of the regulations and business culture, the chances of success are wide open.

Don’t worry about developing your business by setting up a company in Indonesia, because Portcorp is here as a solution for your business, also when you need Entertainment/Impresario. 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 on +6221-5020-8090 for your business succeed in the future!