How do foreigners decide on the proper entity in Indonesia?

Frequently Asked Questions

How many incorporation types exist in Indonesia?

In Indonesia, there are three company types that you can establish based on your business nature, requirements, and preferences.

• Local Company (PT): 100% local ownership.
• Foreign Company (PT PMA): can be entirely owned by foreigners; however, restrictions in business sectors apply
• Representative Office: a branch of the parent company overseas whose purpose is to conduct marketing-related activities without generating income or profits
If investors intend to conduct business in Indonesia, what kind of organization must they establish?

Within the scope of foreign direct investment in Indonesia, foreign investors can typically do business in two ways:

• Set up a PMA (Perusahaan Modal Asing)

PMA is a local subsidiary in the form of a limited liability corporation for foreign investment reasons

• Set up a RO (Representative Office)

According to Law No. 25/2007 on Investment, foreign investors are required to establish a PMA company in order to make direct investments and conduct commercial and business activities in Indonesia. A PMA firm in Indonesia is a legally recognized business entity that can engage in various commercial and business operations as long as it complies with the current laws and regulations. As for RO, its purposes include conducting market feasibility studies and liaison activities.

Should a foreigner deposit the minimum paid-up capital in a bank account to start a business in Indonesia?

It is advisable to make a minimum paid-up capital deposit after the company completes its establishment process. Another option is after the company receives the Articles of Association and Deed of Establishment.

Is it safe to register a product under a local distributor?

Yes and no. It is vital to choose a reliable distributor as they will register the product under their company and become the product license holder and the import license holder. Changing the local distributor is easier if you are satisfied with the cooperation.