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Establishing a Trading Company in Indonesia: Regulations, Tips, and Tricks

Establishing a Trading Company in Indonesia: Regulations, Tips, and Tricks Review by Michal Wasserbauer on 22. 1. 2016 Company Registration in Indonesia, Market Research in Indonesia, Work Permit in Indonesia, Product Registration in Indonesia, Local Partner Selection in Indonesia, Trade Mission in Indonesia, Company Formation in Indonesia, Company Establishment in Indonesia, Company Set Up in Indonesia, Payroll Outsourcing in Indonesia, Tax Reporting in Indonesia, Medical Product Registration in Indonesia, Medical Device Registration in Indonesia, Cosmetic Registration in Indonesia, Food Supplement Registration in Indonesia.
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Starting a trading and/or an import company in Indonesia is an easy process as long as you know the right ways to do so and deal with the right party to help you.

In this article, we will primarily discuss about the establishment of a trading company in Indonesia, how to set an import company, what the regulations concerning the import-export activities, as well as how to establish a representative office in Indonesia.

To start with, we will give you a brief description of what are needed and how long it takes to establish a trading company in Indonesia. To appreciate every rule and regulation set by the Government of Indonesia, every foreigner who wishes to establish a company in this country should follow and prepare the documents. Although there seem to be so many legal things that a foreigner needs to comply to be able to run business in Indonesia, there will always be a third trusted and legal party that can help you realize it. This third party will act on your behalf to take care of everything legally so that you can finally operate your business well in the future and take a huge profit from your investment in Indonesia.

Step by Step to Establish a PT PMA in Indonesia

There are several steps that you need to go through when you want to create your Foreign Direct Investment Liability Company in Indonesia (PT PMA), especially when you want to have a trading company that focuses on the import-export activities in Indonesia:

  1. First of all, as a prospectus investor, you need to do ample researches on Indonesian Company Law. In this initial phase, you don’t need to know about everything, but at least, you have to make sure whether or not your company and the areas you are running meet the local law. This check can do for you as well some market entry consultancy agency.
  2. After you make sure that your future business in Indonesia does not violate any law and regulation apply in this country, you can start to search for the consultancy agency that will help you to register your company.
  3. In the registering process, you need to get the following things:
  4. A license from Investment Coordination Board Principle, which approve your investment in Indonesia;
  5. Article of Association issued by a Public Notary;
  6. Ratification from the Minister of Justice;
  7. Domicile Letter from the local government (signed and stamped by the district, sub-district, and village/local community government where your company office will be located)
  8. Tax Registry Number (NPWP) and Tax Card; and
  9. TDP (business registry to local trade department).

After that, you also need to get a permanent business permit. The application of this permit can only be done once your company is ready to operate. This permit is issued by Investment Coordinating Board. You need to prepare several documents, including:

  1. Notary Deed of Establishment
  2. Investment Coordination Board Principal License
  3. A copy of office and warehouse agreement
  4. A document stating the location of your head office
  5. If option “d” is not available, you can use a virtual office. In this case, consult this with your consultant.
  6. All of those documents above are prerequisites to apply for a General Importer Identification Number (API-U) or Producer-Importer Identification Number (API-P). The application is addressed to the Investment Coordinating Board. In Indonesia, it is possible to import goods without the availability of API-u or API-P. However, it is restricted for only certain goods which are infrequently imported, such as promotional goods, and things used for research and developmental purposes. In addition, this activity can only be done if the Director of Import in the Indonesian Minister of Trade gives approval.
  7. Certain business field may require you to have a specific import license, such as traditional and herbal medicines, children toys, cosmetics, food and beverages, etc.

You can check our Company summary overview for more information here.

Some Important Considerations for Establishing Trading Company:

1. Negative Investment List

It is crucial to understand about this Negative Investment List. Some cores of business in Indonesia are forbidden for foreign investment, such as casino businesses, certain chemical industries, etc. There are also some other fields of businesses that is open for foreign investment. But still with restrictions, such as some agricultural, state crops and forestry businesses, energy and natural resources industries, etc. Consult your business activities openly with your consultancy agent to make sure that you are not violating the rule and regulation apply in Indonesia.

2. One license for one product section

Your business must only have one product section and you cannot run several product sections under one business entity. When you, for example, would like to trade certain agricultural products you cannot have a side business of trading marine products under the same legal entity. You must have two licenses for those two activities.

3. One API-P or API-U can only valid for one certain type of product.

It means that to import different products, you need to register different API-U or API-P.

4. An import company must also have Customs Identification Number.

This document is issued by the Directorate General of Customs and Excise (DGCE). It is part of the custom regulation in Indonesia. This number is valid as long as the company is still active in performing the business for the last 12 months. And does not violate any custom regulations.

 

Some Issues You Need To Pay Attention Carefully

  1. Make sure that you follow every procedure when shipping your cargo to Indonesia. Otherwise, you will get storage charges, or worse, fines for any cargo that cannot be imported to this country.
  2. When you are using the service of an undername importer, deal with the one that really have the import license for the product you are importing. It is best to ask your customer in Indonesia regarding about this matter. As they may have a good solution in case you want to import some goods but you haven’t got any license, yet. You can also consult you consultant for this issue.

Establishing a Representative Office of Foreign Trade Company (KP3A)

This maybe is the best solution for any investor who wants to perform some trading activities in Indonesia, but hasn’t got a chance to establish a company here. KP3A is dedicated for foreign company that wants to open a representative in Indonesia.

The permit can be issued under these conditions:

  1. KP3A can only be applied by the parent company of the products. Therefore, a broker companies are not allowed to establish a KP3A
  2. KP3A can only be issued for 3 years and should be reregistered or expanded every 3 years.

When you want to open a KP3A in Indonesia, you need to assign a local or foreigner to sit as the Chief Representative Officer. Especially for foreign officer, domicile letter and working permit are needed.

Some other documents needed to apply for a KP3A are:

  1. Appointment Letter
  2. Letter of Intent
  3. Statement Letter
  4. Building Rental Agreement Document
  5. Letter of Domicile signed and stamped by the local government.

From the explanation, there are two ways of doing a trading activities in Indonesia. The first one is to establish a trading company, which requires a more complex process, documents, as well as budget. The second one is to open a KP3A or Representative Office in Indonesia. Which is simpler and relatively lower in cost. Every option has its of advantages and disadvantages. Consulting everything to your agent is the best way to be able to meet the entire legal requirements in Indonesia.