Company Registration in Indonesia

Overview of foreign investment in Indonesia

Indonesia is a member country of the G20, which represents the world’s major economies. With a population of nearly 250 million people, Indonesia has the 4th largest population in the world. These promising conditions make Indonesia a very attractive market for investment from around the world.

Government regulations in Indonesia could classify it as a very bureaucratic country. In relation to foreign investment, it is regulated and monitored by a government institution called the BKPM (Badan Koordinasi Penanaman Modal or Indonesia Investment Coordinating Board. All legal arrangements, including company registration, business licenses, and other licenses are issued through the BKPM.

Foreigners intending to establish a business in Indonesia should be aware of few points:

1. What type of legal entity do you need: A foreign direct investment company or a representative office?
2. What line of business will your legal entity will be engaged in? Is it open to foreign investment? If yes, what is the percentage of ownership that is open to foreign participation?
3. What are the requirements for regulatory framework, minimum capital, organizational structure, tax regulations, Indonesian staff, activity reports, etc.

Foreign Direct Investment Company (PT. PMA)

Foreign investors are only allowed to establish a company in Indonesia in the form of a Limited Liability Company – Foreign Direct Investment, which is called as PT. PMA (Perseroan Terbatas – Penanaman Modal Asing). First, it is important to verify the business field on the Negative Investment List (DNI), which is issued by the BKPM, to confirm that the sector is open to foreign investment, closed to foreign investment, or open with restrictions. 

The laws governing PT. PMA establishment are UU No. 25 / 2007 of Capital Investment as well as UU No. 40 / 2007 of Limited Liability Company. The characteristics of PT. PMA are as follows:

• Foreign ownership up to 100% (according to business field)
• Minimum of two shareholders
• Minimum one director and one commissioner
• Minimum investment plan is US$1.2 million, with minimum paid-up capital of 25%, which is equal to US#300,000
• Requires a business license and other licenses according to specific business activities

The process of PT. PMA registration takes around 1.5 months, however a PT. PMA enables the company to perform business activities in Indonesia.

Representative Office

For foreign investors interested in exploring business opportunities in the Indonesian market, a representative office might be an efficient way to begin. To open a representative office, there should be an existing parent company overseas to manage the representative office in Indonesia. A majority of representative offices focus on conducting market research activities as well as marketing and promotion through selling or buying agents. Some foreign investors prefer to set up a representative office first to grow the market in Indonesia before establishing a PT. PMA.

Advantages of a representative office:

• Can be owned 100% by foreign investors
• No minimum capital requirement
• No shareholder, director, commissioner requirement
• Set up process is relatively easy and quick, requiring about 1.5 months

Disadvantages of a representative office:

• Limited role as supervisor, coordinator, and representative of parent company in Indonesia
• Not allowed to conduct direct sales and generate revenue in Indonesia, thus all financial transactions shall be conducted through the parent company overseas

How to establish a business in Indonesia?

Setting up a business in Indonesia must be done correctly and carefully. Considering the changing regulations and heavy bureaucracy in Indonesia, it is crucial to engage professional partner who understands local regulations and the culture in Indonesia.

Cekindo is providing one-stop services for foreign companies and entrepreneurs from various industries to enter Indonesian market. We will assist you in setting up your business in Indonesia, supporting your daily operations and administration, and representing your company in Indonesia.

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