Get to know more about business processes and requirements for running a company in Indonesia. If you cannot find an answer here, we will be happy to answer your questions directly.
1. Company registration
I would like to expand my business to Indonesia. Can I set up a company there as a foreigner?
Yes, it is possible for foreign citizens to expand to Indonesia and set up a foreign-owned company (PT PMA) in the country. Depending on the business line you want to pursue, there are regulations for foreigners to follow when establishing a company in Indonesia.
One of the most important is the so-called Negative Investment List which has been—as well as other regulations in Indonesian—updated frequently. You can find more in our article: The Latest Regulation on Indonesia 2016 Negative Investment List.
Is there any option to expand my business without incorporating a company in Indonesia?
There are several options how to expand your business without forming a legal entity in Indonesia.
HR Outsourcing Services
- Relocate one of your company’s representatives to Indonesia. HR outsourcing means that the employee can obtain a work permit and stay permit (KITAS or KITAP) under Cekindo. We will also be processing and handling payroll, individual tax, as well as his social security insurance.
- Market your product in Indonesia through a local distributor. Cekindo will assist you with the shortlisting possible traders and conduct meetings with them and your company. Based on the outcome, choosing the appropriate local distributor will be a piece of cake.
- Cekindo can also become your local distributor. You can register the product under our company using our license holder services. Read more about Product Registration in Indonesia.
What are the company types in Indonesia?
There are 3 company types you can choose from depending on your requirements, preferences, and the nature of your business. You should consider the expected revenue from the business, the business sector it belongs to, whether there are regulations on foreign ownership within your business sector, and paid-up capital, among others.
- Foreign-Owned Company (PT PMA)
- Local Company (PT)
- Representative Office
You may also consider using the services of a local distributor and import your products to Indonesia without setting up a company. Cekindo can assist with searching for a reliable local distributor, or you may appoint Cekindo as your local distributor. This will give you the advantage of using more than one trader.
What kind of a business is the best for me — a foreign-owned company, local company, or representative office?
As their names suggest, the main differences among three business kinds in Indonesia lie in the nature of the businesses and the purpose of their incorporation.
Owners of a local company (PT) must be Indonesian citizens as even 1 percent of foreign ownership is not allowed. This type of companies is not limited to enter any business field, and restrictions on incorporation are not so tight.
On the contrary, a foreign-owned company (PT PMA) is open for international investors, but the maximal percentage of foreign share differs in various business sectors. Contact Cekindo to get the most updated information on the Negative Investment List.
International investors tend to open representative offices as a first step to understand the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and does not have the right to do the direct selling and receive income. More information in our In-Depth Guide to Representative Offices in Indonesia.
What are the differences between a local company, local nominee company and shelf company?
All business types mentioned above are forms of local companies (PT) it means that the company has to have a minimum of 2 shareholders, 1 director, and 1 commissioner and 100 percent of shareholders and commissioner have to be local while at least one of the directors should also be Indonesian.
While foreign nationals who wish to start a local company might struggle with this requirement, Cekindo came up with a solution in the form of local company ‘packages’:
Local Nominee Company is a local company with local shareholders, commissioner nominees provided. This service enables entrepreneurs to start a business without the hassle of searching for trustworthy local nominees.
Shelf Companies are local companies which have been already established and put ‘on a shelf’ immediately after the registration process. These companies with no business history are the fastest solution how to enter the Indonesian market. For the current offer of shelf companies in Indonesia see our list.
Will I be able to hold 100 percent ownership of a foreign-owned company (PT PMA)?
Following Presidential Regulation Number 44 year 2016, there are some sectors that are fully (100%) open, partly (certain percentage) open, or even closed for foreign ownership.
Check the latest restrictions on foreign investment in the Negative Investment List.
When do I have to deposit money in the bank?
The minimum paid-up capital shall be deposited after the company is established and Cekindo has assisted you with setting up a bank account. There is also another option that you can look into, and that is after the company receives the Article of Association and Deed of Establishment.
Will the government check if I have fulfilled the investment plan of IDR 10,000,000,000?
There is regulation for PMA companies according to which the company has to fulfill the minimum investment plan of IDR 10,000,000,000 or its equivalent of USD 800,000. Twenty-five percent (25%) from this amount is the minimum paid-up capital. We recommend our clients to fulfill the investment plan as this is a legal requirement by the Indonesian government.
Is a foreigner able to become a director or commissioner?
This depends on the type of company you decide to establish.
- In a local (PT) company, a foreigner cannot become a commissioner. It is possible to have a foreign director, but there has to be at least 1 local Director in PT.
- In a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner.
I want to set up my company as soon as possible, is there some way to speed up the registration process?
For setting up a local PT company or PT PMA company, the process takes 2 months. If you would like to start doing business as soon as possible, Cekindo has the shelf company option, which means the availability of a ready-made company that allows for the immediate transfer of management control to you. With this option, you would have a company ready to operate within 5 days.
Check our current offer here.
I would like to set up a local PT company, but I don’t have a reliable local partner to act as the shareholder. What should I do?
Selecting a reliable local partner for your local PT company is key to success and will significantly prevent you from dealing with possible future problems. In case you can’t find any reliable local partner but need to set up a local PT company, Cekindo offers assistance. We provide local nominee services and become your local partner who will not interfere with your business.
Find more information when reading The Comparison between Local Partner Selection and Local Nominee.
Is it possible to use a business visa to work in Indonesia?
The business visa is a type of visa used for business purposes such as attending business meetings, seminars, exhibitions, or training. Therefore it is not the correct type of visa to use for this purpose.
If you are planning to work in Indonesia, then you should apply for a work permit as well as the limited (KITAS) or permanent (KITAP) stay permit.
You can find more information on visa types here.
Is it easy to obtain a business visa or working visa?
This will vary depending on your country of origin. Indonesia has a list of restricted countries, including Afghanistan, Guinea, Israel, North Korea, Cameroon, Liberia, Niger, Nigeria, and Somalia.
Citizens from those countries who are planning to obtain a stay visa or working visa will find the process complicated and difficult and with a large possibility that their application will be rejected.
Who can be a visa sponsor? Can it be an individual?
For both single and multiple entry business and working visa as well, the sponsor has to be a company. The sponsor company is the legal entity that either invites you to a business meeting or the business for which you will be working for.
Regarding social-cultural and retirement visa as well as KITAS & KITAP stay permits, the sponsor must either an Indonesian legal entity or citizen.
In case you don’t have a visa sponsor, Cekindo provides sponsorship via HR Outsourcing and also manage payroll for your foreigner employee.
How long will the process take? For how long will my visa be valid?
The duration of processing the visa will largely depend on the on a type of visa you are applying for:
- Work and stay permit take 2 months to arrange. If an applicant is a director of a company, then it is valid for 1 year. If the foreigner works in any other position than the visa is valid for 6 months.
- Multiple entry business visa processing will take 1 week and will be valid for 1 year, but there is the maximum length of stay in Indonesia of 2 months, meaning that the person has to leave Indonesia every 2 months.
- Single entry and social-cultural visa processing takes 1 week and will be valid for 2 months with the possibility to extend the visa 4 times, each time for an additional 30 days, which means the maximum stay in the country is 6 months.
- Retirement visa is valid for 1 year and can be extended annually for the maximum of 5 years. The process takes 2 months.
My company has been established but currently does not have any activities, should I report the company’s taxation?
After your company is established, it is mandatory to submit a monthly and annual report even if you do not have any business activities and zero taxes.
My company has a tax ID; however, I never submit tax reporting. Will this cause a problem to my company?
The tax office will collect from your business an administrative penalty for delaying or not correctly and promptly filing the tax report. To avoid this, it is best to hire a local third party to handle your taxation matters in Indonesia such as Cekindo.
Is there any obligation regarding company payroll?
All companies in Indonesia shall be registered for both Health and Social Security BPJS as mandatory Indonesian insurance that will affect the employee payroll. There will be a certain percentage that should be borne by the company as well as the employee.
There are several other taxes that employers should not forget about such as withholding tax. The percentage and type of taxes vary from case to case so contact us to get the information on your specific field.
For a detailed overview, check Important Points You Should Know about Payroll System in Indonesia.
What are the deadlines for annual tax return?
The deadline for an individual tax return is on 31st March. A corporate tax return must be lodged within four months after the end of the calendar year or taxable year.
Continue reading 21 Must-Know Facts about Annual Tax Return in Indonesia.
4. Product registration
My company is planning to distribute products in Indonesia, what are the regulations that we need to consider?
Prior to distributing your product in Indonesia, you will have to register your product with the BPOM (National Agency of Food and Drugs) and MoH (Ministry of Health). Only an Indonesian legal entity can register the product, that means if you decide to distribute your product via a local distributor, the local distributor will register the product under his entity in Indonesia, and he becomes the product licence holder.
Cekindo can act as your local distributor and register the product under its name. Another option would be to set up a company in Indonesia and register the product under your own legal entity in Indonesia.
Is it safe to register the product under a local distributor?
Yes and no. It is very important to choose a reliable distributor because he/she will register the product under their company and become the product licence holder as well as the import licence holder. It is difficult to change the local distributor in case you are not satisfied with the cooperation. Cekindo offers the possibility to register your product under their company name for it to become your trusted local distributor and allow you to have more sub-distributors.
What if my product has been registered under a local distributor and we decide to transfer the license to our company or another distributor?
You can transfer the license as long as your current local distributor agrees to change the product license holder. The procedure will be different for each product category. We can only recommend you to try to prevent these issues by setting cooperation with a trustworthy partner from the beginning.
What requirements are needed if my Indonesian company will register the product?
You need to register the product with the BPOM (National Agency of Food and Drugs) and MoH (Ministry of Health). The type of testing and documents requirements will depend on the type of product you want to register. Also, the timeframe for registration could vary from between 3 to 15 months.
Please note that you should have an import license and a NIK (Custom registration certificate) prior to registering your product. The whole process starts with registering your Indonesian company to BPOM for you to be the license holder. Once your company gets the approval, then you can move forward to register each of your products. Once each product gets the number issued by BPOM, you can start the importation by submitting the import notification letter to BPOM.
You can find more relevant information on the product registration here.
If my company is Halal certified for Europe or Malaysia, does it mean it is also halal certified for Indonesia?
The Indonesian Halal bodies recognise some of the international halal certifications. Nevertheless, since there might be differences in the standards used by each of the certification bodies, it will still be needed to process Halal Certification in Indonesia.
Do all the products sold in Indonesia need to be halal registered?
The law no. 33 in 2014 that regulated procedures and applications for halal certification, states that all the products distributed in Indonesia which are not halal certified will be considered as non-halal in 2019.
In a country with the biggest Muslim population in the world, not registering your halal products can influence your sales tremendously.
It is advisable to apply for a halal certification as soon as possible. Learn more about Halal Certificate Registration with Cekindo.
5. HR Outsourcing
What are Indonesian employment regulation standards?
- Minimum salary of IDR 3.8 mil for Jakarta region
- 12 days minimum annual leave
- BPJS (social security) coverage
- Religious Festivity Allowance (every Ramadhan)
More information in our Insurance and Social Security (BPJS) Type in Indonesia.
How does HR outsourcing mechanism work?
Cekindo signs a standard employment agreement with an outsourced employee. After this, we take care of the employee’s payroll in coordination with your company. Cekindo is also responsible for paying the salary to the employee.
What taxes are involved?
- Employee income tax article 21
- VAT on both service invoice and salary invoice
- 2% recovery tax on salary invoice
Looking for more answers? Do not hesitate to chat us or call us and for those residing in Indonesia, our consultants in Jakarta, Bali in Semarang are fully available to your needs.