A Complete Guide for Registering a Company as Foreigners

Lombok is one of Indonesia’s most popular holiday destinations, recognized for the stunning beauty of its natural surroundings and the friendliness of its people. With the pace of tourism picking up, the island has become a magnet for both local and foreign companies to start investing in Lombok, thanks to its untapped natural and human resources opportunities.

Is It Worth Investing in Lombok?

Investing in Lombok might seem very lucrative, but one should know the legal aspects before starting a business. Understanding various rules and regulations would help investors mitigate the risks of their Lombok investment.

This article will provide a comprehensive guide to foreigners while investing in Lombok.

How to Start Your Business in Lombok

Before starting your business in Lombok, consider a few things. These will help you streamline your business development in Lombok’s capital and neighboring regions.

Determine Your Business Model

Determining your business model is the first step to starting a company in Lombok. Usually, you can choose between PT PMA, Local PT, or a representative office (KPPA) to be established under your company name.

1. PT PMA

PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a limited liability company that allows a foreign citizen or a foreign business to earn income, profit, or participate in sales within the Indonesian territory.

2. Local PT

Indonesia’s most popular business type is a local limited liability company, or “PT.” Indonesian nationals must entirely own a PT, and the number of work licenses available to foreigners is likewise limited. A foreign citizen can also create PT by collaborating with a local partner to form a joint venture.

3. Representative Office (KPPA)

Establishing a representative office benefits foreigners who do not need to engage in commercial operations but want to explore business prospects. Since KPPA’s services are restricted to marketing and promotion, a limited liability corporation must be formed to do business and generate revenue.

Authorized Capital

Choose Business Address and Locations

The location of your company is an important consideration for company registration in Indonesia. Even though regional rules may differ in particular locations, a domicile letter is almost always required before beginning PT PMA.

A rental agreement must be presented to get a domicile letter, as many localities do not allow a home address (such as an apartment or a house) to be used as a business address. The company’s registered address must be in a building with a valid construction permit (IMB), and the property must be appropriately zoned.

Alternatively, one can choose to set up a virtual office. One of the primary reasons why more and more international investors prefer shared or virtual offices is because of exemptions in regional regulations and complex legalities.

Use Virtual Office

A virtual office might help you save money on overhead. You won’t have to bother about obtaining building permissions or determining whether or not your address may be used as an office. Registering your company in Indonesia might also be significantly faster when you utilize a virtual office service.

Read more: Key Factors to Consider before Choosing Your Virtual Office in Indonesia

How to Obtain a Business License in Indonesia

In Indonesia, all businesses require a business license or would be barred from engaging in any commercial activity. Hence, every business owner in the country should be aware of such permits.

Since 2018, Indonesia has implemented the Online Single Submission (OSS) system, which streamlined the electronic processing of company licenses.

OSS Risk-based Approach

Business licenses have been modified as part of the Omnibus Law framework. The Indonesian government has also updated OSS v1.1 to OSS Risk-based Approach to implement this new system.

Business operations will be examined and classified by the OSS system into the following categories:

• Low Risk
• Medium-Low Risk
• Medium-High Risk
• High Risk

These categories will define the type of business license a company must get before starting operations in Indonesia.

Investing in Lombok: Understanding Corporate Tax System in Indonesia

If a company is incorporated or has its domicile in Indonesia, it is considered a tax resident.
A foreign company that does business through a permanent establishment (PE) pays the same tax rates as local taxpayers, plus an extra Branch Profit Tax.

Corporate Income Tax Rate

The corporate income tax (CIT) rate in Indonesia is 25%. For fiscal years 2020/2021, the CIT rate is 22%.

A 3% cut-off from the regular CIT rate is available to public businesses with a minimum listing requirement of 40% and other specified circumstances. As a result, the CIT rate will be 19% for the fiscal year 2020/2021 and 17% from 2022 and beyond.

A 0.5% CIT rate applies to some small and medium-sized companies (SMEs) with less than IDR 4.8 million gross revenue.

Tax Incentives in Indonesia

The Indonesian government has introduced incentives such as Tax holidays, Tax Allowances, and Investment Allowance. It has also set up SEZs to lure domestic and foreign investors and improve the ease of investing in Lombok.

Start Investing in Lombok With InCorp

Company registration in Indonesia consists of multiple time-consuming and overly official procedures. Having company registration professionals, like InCorp Indonesia (an Ascentium Company), by your side can save you a great deal of time and provide you with a hassle-free experience.

We provide a broad spectrum of ancillary services related to company registration, like legal consultancy, business license and other documents acquisition, tax and accounting, and HR services.