Undoubtedly, Indonesia offers great business opportunities whether for local citizen and also for the foreign people. To carry out and start a profitable business in Indonesia, a foreigner needs to be incorporated as a foreign limited liability company or a foreign owned company (PT PMA) in Indonesia.
The Incorporation of a limited liability company is governed by the Company Law No. 40 of 2007 (the “Company Law”). Once a business decides to expand and takes advantage of this growing market, it will need expert help in navigating the rules on how to register a company in Indonesia.
Most foreign-owned companies establish the Indonesian version of a Limited Liability Company (LLC), which is known as a PMA—Penanaman Modal Asing –in Indonesia, since it can take the form of a 100% foreign-owned limited liability company or can be established as a limited liability company through a joint venture with Indonesian partners.
The advantages of this type of company are that it gives the foreign investor full control over the direction of the company, no restriction on where a PMA can operate in Indonesia and reduces the risk in finding a suitable local partner.
Certain business fields require a foreign-owned company to establish a local partner and are allowed up to a certain percentage of ownership depending on the sector. The specifics of this are covered in the Negative Investment List.
However, there are some business activities that are closed for foreign ownership based on Negative Investment List, therefore should be established as Local Indonesian companies (refers to President Regulation of Republic of Indonesia No.39/2014 concerning the list of business field that is closed to Investment and business field that are conditionally open for investment).
In this case for foreign investors still have the alternative option by establishing a local nominee company in form of local limited liability (i.e. Perseroan Terbatas) with 100% local shareholder but keeping under foreign investors control.
Regarding the updated regulation from BKPM (Read: New Regulation on Capital Submission Proof), investors should invest above USD 1 million or refers to IDR 10 billion as their investment plan with the minimum paid-up capital is above USD 250,000 or refers to IDR 2.5 billion.
An investment plan can be either cash or fixed assets such as machinery however it is excluded for Land and buildings (Read: How to Own Land and Property in Indonesia).
Paid-up capital shall be paid after the company is established and has a bank account (stated by notary letter). A company needs to reach investment realizations above USD 1 million for obtaining a Business license as their permanent license, import license, and other licenses which relate to the company’s sector.
|Approval of company name (should consist of 3 words)||The Ministry of Law and Human Rights||2 days|
|Review, Revision, and Approval of Principle License as their temporary license||BKPM||14 days|
|Article of Association (AKTA)||Notary||4 days|
|Legalized of Legal Entity (Deed of Establishment/ SK Kehakiman)||The Ministry of Law and Human Rights||3 days|
|Certificate of Domicile||The landlord of the office building and Local Council||3 days|
|Tax Payer Registration Number (NPWP) and letter of registered tax (SKT)||Tax Office||3 days|
|Nomor Izin Berusaha (NIB)||Provincial Government||1 day|
The PMA company registration process in Indonesia is very precise and can be demanding. In addition, as the ASEAN nations update and alter business regulations, having an expert partner on the ground in Indonesia can be critical to success. Engaging professional assistance helps companies navigate local regulations and understand the culture of business in Indonesia. Check more for a complete overview of business services in Indonesia.
The Indonesian government has made it easier for foreign investors to invest, register a foreign owned company and start a business in Indonesia. If in the past years the company registration process took at least two months to be completed, the case is different in 2020. Now, a foreign investor can have their company registered in between 1 and 1.5 months.
Another simplified procedure takes place in Jakarta. If you want to set up your business in Jakarta, you are not required to submit Company Domicile (SKDP). This regulation has been running effectively since May 2019.
As such, the company registration process for PT PMA in 2020 looks like the following. The registration is done via the Online Single Submission (OSS) system.
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