company incorporation indonesia

Company Incorporation Indonesia: Learning from the Expert

  • InCorp Editorial Team
  • 19 October 2017
  • 4 minute reading time

Indonesia is opening all its doors for grand business opportunities, and many foreign investors do not want to miss the chance to become one of the early birds and start with business incorporation.

Are you wondering what kind of company would fit your needs the best and how to start a business in Indonesia? If the fruitful Indonesian market also attracted your attention, this article will help you with the first steps you must take.

What Kind of Company Fits You Best?

Indonesia has several types of companies that foreign are commonly making mistakes of when starting a business. Before paying closer attention to individual types, there are few points at which you should concentrate during the process of choosing the most suitable kind of your future business entity.

  • A kind of business your legal entity is engaged in
  • Openness to foreign investment
  • Percentage of ownership which is open to foreign Investment
  • Regulatory framework
  • Minimum capital
  • Organization structure
  • Tax regulations
  • Indonesian and foreign staff
  • Mandatory reports

Foreign Limited Liability Company (PT PMA)

The foreign-owned company, also known as “PT PMA,” is the favorite choice of foreigners who want to build a business in Indonesia. Even though foreigners can still own up to 100%, you still have to investigate the exact ownership limits in accordance with the Negative Investment List according to their business line.

The minimum authorized share capital must be IDR 10 billion of which 25% must be paid up to the company bank account once the company is established. The PMA company has to have a minimum of 2 shareholders, 1 director, and 1 commissioner (all of whom can be foreigners, individual/corporate). In addition, it’s mandatory to report Investment Activity (LKPM) after obtaining the principal license quarterly.

Representative Office in Indonesia (KPPA)

The representative office of a foreign company, also known as “KPPA” is a convenient way for foreign businesses to gain a market presence in Indonesia. Its services are limited to marketing and promotion activities, as it is not permitted to do direct selling or receive income.

  • Foreign can only be incorporated a KPPA in the capital of Indonesian provinces (i.e. Jakarta, Bandung, Yogyakarta, Kalimantan, etc.)
  • The location of KPPA must be in the office building.
  • KPPA permit is valid for 3 (three) years and can be extended 2 (two) times for 1 (one) year each.
  • After 5 years foreigners could grant their KPPA extension for different activities than before.
  • KPPA must be incorporated in an office building/tower.
  • In case the representative executive is a foreigner, he/she must obtain KITAS and Work Permit to stay and work in Indonesia.

Cekindo will assist you to choose the type of business that fits your needs the best. General information about differences can be found here. However, do not hesitate to approach us directly.

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Incorporation in Indonesia: Top Mistakes You Should Avoid

We already mentioned that it is not advisable to start a business with low initial capital. However, many foreign investors are guilty of committing other common mistakes they should have avoided earlier. This mistake can have serious consequences on their business.

Time-consuming Process

Do not expect running a company incorporation Indonesia in a fast and smooth process. Rather, take into consideration all delays that might occur during the legislation. Also, to avoid delay, you need to start the process well in advance.

Unprofessional (and Unreliable) Agent

Starting a business in Indonesia is not easy. Many unprofessional agents take advantage of it by becoming service providers. Therefore, you need to have a closer look at the references and their knowledge of the market.

Cekindo is the leading consulting firm providing services for businesses operating in Indonesia. We register dozens of companies every month and our legal team is always ready to assist you.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

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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.

Frequent Asked Questions

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.