Every year, there are more than one million Australian tourists visiting Indonesia and many of them are investors who have seen the huge opportunities that Indonesia offers and decided to seize them. With the recent economic partnership agreement (The Indonesia-Australia Comprehensive Economic Partnership Agreement – CEPA) signed by Australia and Indonesia, it is expected that we will see rapid growth of business incorporation through company registration in Indonesia by Australians.
This newly signed agreement indicates that all Australian tariffs on Indonesian imports will be eliminated by the end of 2019, and 94% of Indonesian tariffs on Australian imports will be progressively dismissed at the same time as well.
If you are an Australian who is ready to set up a company in Indonesia, this article is for you. Here we are going to talk about the requirements for an Australian to start a business in Indonesia, as well as your visa requirements, legal entity options, local sponsorship, and shelf company alternative.
Indonesia is Australia’s 13th biggest trade partner. In 2018 alone, the two-way trade between Australia and Indonesia amounted to US$8.6 billion, with textile and footwear industries being the largest contributors.
Under CEPA, not only that major tariffs are going to be pulled out to achieve free trade in goods, Indonesia also opens up the country’s university sector for foreign investments. Now, Australians can own up to 67% foreign shares in the university sector, which was previously closed to foreign ownership under the Negative Investment List.
There are two major types of legal entities that Australian investors can consider while setting up a company in Indonesia. They are a local company (PT) and a foreign company (PT PMA). Of course, Australians must meet certain requirements in order to be able to register with either one of the legal entities.
A PT is a limited liability company that is owned entirely by Indonesian nationals. It is the simplest type of entity to establish in Indonesia and Australia can only set up this type of company through a Special Purpose Vehicle agreement that provides professional shareholders/commissioners/directors.
There are some limitations for small local PT though. A small local PT is not allowed to hire foreign workers and apply for work permits.
This is the most common type of limited liability entity that can be owned by foreigners. Depending on the industry or business sector you are in, the percentage of foreign ownership of a PT PMA that foreigners can have must follow the Negative Investment List (NIL).
The formation of PT PMA is more time-consuming than a PT because it requires more paperwork and foreigners will usually encounter some red tapes. Therefore, you are advised to engage a reputable consultant to handle your PT PMA incorporation.
However, unlike the local company PT, a PT PMA is permitted to hire foreigners and provide Australians with RPTKA approval and KITAS/ITAS sponsorship.
Company Registration for PT PMA in 2020
In 2020, the process of registering a PT PMA has been simplified by the Indonesian government in order to attract more foreign investments.
The company registration for PT PMA can now be done online via the Online Single Submission (OSS) system to streamline the establishment process. It takes only between 4 to 6 weeks to establish a PT PMA online.
In short, the process is as follows:
If you want to jumpstart your business in Indonesia without incorporating a new company, a shelf company may be your best option.
A shelf company allows Australian investors to have a reputable market presence in Indonesia.
As a general rule of thumb, an Australian who wishes to enter Indonesia must have a passport with a minimum of 6-month validity and blank pages for enough visa stamps. Other than that, there are several visa options for Australians based on the purpose of your visit:
This visa allows Australians to stay for no more than 30 days and it is free of charge with no extension available. However, you should not engage in any form of business activity that involves monetary transactions. A visa run is not recommended if you want to take advantage of the free visa as you might be stranded at the immigration or worse, denied entry into Indonesia.
If you really have to stay more than 30 days, you should opt for a Visa on Arrival, Social and Cultural Visa, or Business visa, which will be discussed next.
A VoA is also valid for 30 days but the difference is that it can be extended once. The purchase of a VoA can be done upon arrival at Indonesian airports. Receipt of a VoA must be kept for the extension application.
A social and cultural visa has a longer validity, which is 60 days. However, you will need a sponsor letter from an Indonesian individual or organization for a successful application. This visa can be extended a maximum of 4 times and each time allows Australians to stay no more than 30 days.
There are two types of business visas in Indonesia: single-entry business visas and multiple-entry business visas. They are issued for the purpose of non-monetary activities as well, such as attending conferences or doing market research.
A single-entry business visa is valid for 60 days for one entry, while the multiple-entry business visa is valid for 12 months for multiple entries and each entry has a period of 60 days.
You are highly recommended to apply for your Indonesian business visa online to enjoy a quicker and hassle-free application.
Whether you need further information on the business establishment in Indonesia or are ready with your option of a legal entity, you are welcome to discuss with us.
We can provide assistance in business incorporation and registering a company in Indonesia as well as visa and permit applications.
Get in touch with us by filling in the form below. Or, visit one of our offices in Jakarta, Bali, and Semarang.