Indonesia Business Setup: A Guide on What to Prepare

5 Things to Prepare before Incorporating a Company in Indonesia

  • InCorp Editorial Team
  • 7 January 2020
  • 4 minutes reading time

Indonesia is no doubt a truly attractive market that all foreigners are eyeing. Recently, the country has also been ranked the world’s 16th largest economy, making business setup in Indonesia something to be considered. However, regardless of where you are from, an entrepreneur’s life can be an exciting yet frightening roller coaster if you are not fully prepared, especially when it comes to company formation in Indonesia.

Apart from just putting in all your effort, it is important that you focus on the right things, especially at the very beginning of your company incorporation. Several good first steps include getting familiar with the legal aspects of your sector, doing market research, assessing your finances, and so on.

In this article, Cekindo thinks it will be useful to highlight some of the things you need to consider before incorporating your company in Indonesia.

1. Choose a Company Name

Choosing a company name is important when it comes to company formation in Indonesia, and not always so easy to change after your company is incorporated. Certain names may not be appropriate or available for your business type. If you need help, an experienced business consultant can provide you with useful advice.

Your company name must follow some requirements:

  • It is not allowed to be the same as another company’s name
  • It is mandatory that your company name has three words
  • Crude and profane words are forbidden

 

It is always a good idea for you to prepare three names so that you can have options.

company formation in indonesia

2. Determine the Availability of Your Business Sector before Setup in Indonesia

Another critical step to take when incorporating your company in Indonesia is to know if the business sector you are interested is actually available.

The Indonesian government groups all companies in the country into several business classifications or KBLI in the Negative Investment List. Therefore, it is possible that the business sector you want to invest in is in fact prohibited for foreign investment.

3. Secure a Business Address for Business Setup

You must firm up your official office address in a commercial area before you can register your company in Indonesia, whether it is a traditional office or a virtual office.

Don’t be surprised that your registration is delayed or even declined if you do not submit your actual office address. For business owners who do not have a physical office, a virtual office allows you to have a solid address in a popular commercial area so that you can incorporate your company without any issues.

4. Find Out if You Have Sufficient Capital

Starting a business in Indonesia requires minimum capital and that is why you are encouraged to know if your capital is limited. Having not enough capital can be a large hurdle for you to start a business, let alone to run a business.

For a foreign-owned company PT PMA, a foreigner must have an investment plan of at least IDR 10 billion with a minimum paid-up capital of also IDR 10 billion. The best thing to do is to prepare the necessary minimum capital.

5. Allow Time for Incorporation

One to one and a half months are the time foreigners need to begin their incorporation process before they want to start their businesses. A business consulting firm can simplify your incorporation process but it still requires time. There is no way that the Indonesian government will make an exemption for any type of business.

Therefore, we strongly advise you to have at least one to one and a half months for the entire incorporation. This is the minimum time required and the incorporation may take even longer if your business requires other permit/license applications.

Business Setup in Indonesia with Cekindo

Incorporating your company or business setup in Indonesia provides many advantages for your business such as lower corporate tax rate, owner’s limited liability, and better access to grants and capital.

Let us take care of your company formation in Indonesia, including the registration and the paperwork, so that you can focus on what is vital to growing your business in Indonesia. Our experts will complete the process as timely and effectively as possible to get your business up and running.

Fill in the form below to get started.

Verified by

Ales Cina

Consulting Manager at InCorp Indonesia

Aleš manages solution delivery at InCorp Indonesia, optimizing incorporation processes and client relationships. His experience in internal auditing, retail, and sales offers valuable global insights. Aleš, with a degree in Economics and Finance from the Czech Republic, helps clients navigate cross-border business challenges, focusing on cultural and legal insights.

Frequently Asked Questions

    In a PMA Company in Indonesia, shareholders typically have limited liability, meaning they’re not personally liable for agreements or losses beyond their shareholding, except in certain circumstances. Liability may extend if the company isn’t properly established or if shareholders exploit the company in bad faith, engage in unlawful acts, or deplete company assets to the detriment of creditors.

    You can find the difference below:

    • PT: limited liability company (shareholders are not legally liable for company liabilities)
    • CV: a proprietary company where liability falls on the shareholders

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.

      • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

    Yes, PMA companies in Indonesia can hire expatriates, but certain positions are restricted by the Ministry of Manpower. Expatriates need both working and stay permits, and employers must employ Indonesian counterparts for each expatriate employee, typically at a ratio of at least one Indonesian counterpart per expatriate.

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Disclaimer

The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

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