Indonesia is a land that is full of diverse resources, an abundant workforce, and rich culture. This is why Indonesia offers a wide array of opportunities that have sparked many investors’ interest. A report from Trading Economics states that in the March quarter of 2020 alone, foreign direct investments in Indonesia recorded a total value of US$6.4 billion. This positive business outlook is what prompted business investors to commence their business setup in Indonesia.
However, before you leap, read through the ultimate checklist for incorporating a company in Indonesia.
Company Setup in Indonesia: The Ultimate Checklist
1. Choose the Right Legal Entity
There are for major types of legal entities you can choose from when incorporating a company in Indonesia:
- Foreign-owned company (PT PMA)
Foreigners can own this type of company with shares 1-100%
- A local company (PT)
Fully owned by Indonesian nationals. Foreigners can set up this type of company through a Special Purpose Vehicle arrangement
- Representative office (RO)
Easy setup compared to PT and PT PMA. However, this type of structure does not allow you to generate income
- Shelf company
This type of company has aged for years. Business owners can purchase it through reputable provider and run their business right away
2. Get Ready Immigration Permits and Documents
You will need the necessary documents to work and stay legally in Indonesia:
- Stay visa
A stay visa or a temporary stay permit (KITAS) or also known as ITAS is a type of visa in Indonesia that allows you to remain in the country while you work. An KITAS/ITAS must be sponsored by an employer or a spouse.
- Work permit
Foreigners who want to work and earn an income in Indonesia must apply for a work permit before entering the country. To get one, your sponsor company must obtain the Foreign Worker Utilization Plan approval (RPTKA) from the Indonesian Ministry of Manpower. RPTKA approval now serves as the basis for the authority to grant a limited stay visa (VITAS). Once you have received a VITAS, the immigration in Indonesia will issue your KITAS/ITAS.
- Investor KITAS/ITAS
An investor KITAS/ITAS is a great choice for many investors due to its many benefits including easy application and work permit fee waiver. Besides, foreigners can start work right away with this visa.
3. Satisfy Local Director Requirement
Under the Indonesian Company Law, all foreign-owned companies must have at least one resident director or local director.
A resident director has to be an Indonesian resident. If investors of the foreign companies do not reside in Indonesia, they can assign a local as their resident director through Special Purpose Vehicle arrangement.
4. Comply with Indonesian Tax Laws and Regulations
The main taxes in Indonesia, among many others, you need to adhere to:
- Corporate tax
Corporate tax is also known as company tax. It is a type of tax imposed on legal entities doing business in Indonesia. The general rate for corporate tax is 25% (becoming 22% in 2020).
- Withholding employee tax
This is a tax withheld from salaries of the employees and paid directly to the Indonesian tax authorities.
- Value-added tax (VAT)
VAT is a consumption tax levied on goods and services at every point of sale. The VAT rate for most goods and services in Indonesia is 10%.
5. Open a Bank Account
Foreigners can open a personal bank or a corporate bank account in Indonesia. A foreign individual bank account requires proof of residency such as KITAS/ITAS or KITAP/ITAP.
To open a corporate bank account, you will need the following:
- A recent photo of the applicant
- A copy of passport or identity card
- Investment approval from BKPM
- Domicile letter
- Tax registration number
- Deed of establishment
- A deposit
Business Setup in Indonesia with Cekindo
Investors worldwide favor the company incorporation in Indonesia due to its established business environment, improving legal and taxation systems, low costs, well-equipped infrastructure, and high-quality professionals.
Indonesia offers unlimited business opportunities and tens of thousands of international businesses have benefited from starting a business in Indonesia. Cekindo can offer expert services to help your business thrive. Join the countless other entrepreneurs who have launched their businesses with Cekindo.
Should you have any inquiries about company incorporation or business setup in Indonesia, please complete the form below and we will get back to you soon.